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Money to fill the gap? Local financial development and energy intensity in Europe and Central Asia

Author

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  • Igor Bagayev
  • Boris Najman
Abstract
In this paper we provide original findings on the impact of local financial development (LFD) on manufacturing firms' energy intensity in European and Central Asian (ECA) post communist countries. We implement the two-step method of Guiso et al. (2004) in order to build a lagged measure of financial development at the local level. The paper is the first to use this methodology to assess local financial development in the ECA region and to test its effect on firm-level energy demand. According to related literature, our findings also show that firm size matters. But we also provide a new insight about the non-linear effect of financial development depending on the scope of the financial market. We show that while energy consumption of small businesses is more affected by local financial markets, large firms are more sensitive to countrywide financial in-depth. Overall, this paper provides econometric evidence for a financial access explanation of the "energy efficiency gap". Improving financing opportunities should increase firms’ energy efficiency. Moreover, focus on local conditions and small firms should be an important feature of active energy-saving financial policies.
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Suggested Citation

  • Igor Bagayev & Boris Najman, 2014. "Money to fill the gap? Local financial development and energy intensity in Europe and Central Asia," Erudite Working Paper 2014-02, Erudite.
    • Handle: RePEc:eru:erudwp:wp14-02
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    References listed on IDEAS

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    Cited by:

    1. Bagayev, Igor & Lochard, Julie, 2017. "EU air pollution regulation: A breath of fresh air for Eastern European polluting industries?," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 145-163.
    2. Nesma Mohamed Ali, 2017. "Towards a better integration of the informal sector: three empirical essays on the interaction between formal and informal firms in Egypt and beyond," Erudite Ph.D Dissertations, Erudite, number ph17-05 edited by Manon Domingues Dos Santos & Boris Najman.
    3. Nesma Ali & Boris Najman, 2016. "Informal Competition, Firms Productivity and Policy Reforms in Egypt," Working Papers 1025, Economic Research Forum, revised Jul 2016.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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