Productivity-Enhancing Demand Shocks: Evidence from the U.S. Ethanol Boom

52 Pages Posted: 26 Apr 2014 Last revised: 15 Aug 2014

See all articles by Richard Kneller

Richard Kneller

University of Nottingham

Danny McGowan

University of Nottingham

Date Written: April 24, 2014

Abstract

This paper examines the effect of demand on productivity. We exploit the Energy Policy Act of 2005 as a natural experiment which generated plausibly exogenous variation in the capacity of ethanol plants to establish the causal effect of demand on productivity within the corn sector. Using physical output productivity measures we show that the demand shock caused firms to increase productivity by 35% and provide evidence that this was driven by demand altering final goods’ prices which spurred technology adoption. This finding cannot be explained by reallocation effects and is robust to a barrage of robustness, falsification, and placebo tests.

Keywords: Demand shocks, productivity, technology adoption

JEL Classification: D22, D24, L16, Q11

Suggested Citation

Kneller, Richard and McGowan, Danny, Productivity-Enhancing Demand Shocks: Evidence from the U.S. Ethanol Boom (April 24, 2014). Available at SSRN: https://ssrn.com/abstract=2428905 or http://dx.doi.org/10.2139/ssrn.2428905

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Danny McGowan (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
43
Abstract Views
375
PlumX Metrics