Complementarity between labor and energy: A firm-level analysis

Lucas Bretschger, Ara Jo

Research output: Contribution to journalArticlepeer-review


This paper extends the literature on the potential negative employment effects of environmental policy by bringing to the fore a key factor that directly regulates its magnitude: the elasticity of substitution between labor and energy. Using firm-level data from the French manufacturing sector and addressing endogeneity concerns, we provide empirical estimates that point to strong complementarity between labor and energy. We then investigate the empirical relevance of the elasticity of substitution in studying firms’ response to changing energy prices. Our findings suggest that the negative employment effects of rising energy prices are largely driven by firms with limited substitution capacity.
Original languageEnglish
Article number102934
JournalJournal of Environmental Economics and Management
Early online date1 Feb 2024
Publication statusPublished - 31 Mar 2024


  • Elasticity of substitution
  • Employment
  • Market-based regulation

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law


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