Spatial Economics Seminar Amsterdam

Beata Javorcik (University of Oxford, United Kingdom)
Thursday, 30 November 2017

The link between foreign ownership and environmental performance remains a controversial issue. This paper contributes to our understanding of this subject by analyzing the impact of foreign acquisitions on plant-level energy intensity. The analysis applies a difference-in-differences approach combined with propensity score matching to the data from the Indonesian Manufacturing Census for the period 1983-2001. It covers 210 acquisition cases where an acquired plant is observed two years before and at least three years after an ownership change and for which a carefully selected control plant exists. The results suggest that while foreign ownership increases the overall energy usage due to expansion of output, it decreases the acquired plant’s energy intensity by about 30% two years after the acquisition. In contrast, a change from foreign to domestic ownership leads to a rise in energy intensity. At the aggregate level, entry and expansion of foreign-owned plants is associated with industry-wide reduction in energy intensity. Joint with Arlan Brucal (London School of Economics) and Inessa Love (University of Hawaii at Manoa).