Impact of disaggregated ICT capital on electricity intensity in European manufacturing

Abstract

In this article we empirically analyse the impact of disaggregated ICT capital on the electricity intensity in five major European manufacturing industries (chemical, food, metal, pulp and paper, textile). The analysis of each industrial sector is based on an unbalanced panel including data for eight EU member countries (Denmark, Finland, Germany, Italy, Portugal, Slovenia, Sweden and the UK) for the period 1991 to 2005. The panel-econometric approach, in which we account for country-specific fixed effects, is based on a factor demand model similar to the one derived in Collard et al. (2005) for the French service sector. On the one hand, our analysis provides some evidence for an electricity-saving effect on production, induced by communication technologies in all sectors considered. On the other hand, the effect of computers and software on the electricity intensity of industrial production is not that clear-cut, but it does seem to be strongly dependent on the sector-specific production processes involved. Overall, the net effect of ICT diffusion on electricity intensity of production appears to be in favour of an enhancement of electricity efficiency in production.