Effects of Energy Efficiency on Firm Productivity in Kenya’s Manufacturing Sector
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Date
2022-03-22
Authors
Macharia, Kenneth Kigundu
Ngui, Dianah
Gathiaka, John Kamau
Journal Title
Journal ISSN
Volume Title
Publisher
Canadian Center of Science and Education
Abstract
There is concern about probable energy efficiency and economic performance trade-off, particularly in developing
countries which often require more energy consumption to spur their economies. This study assesses the relation
between energy efficiency and total factor productivity in Kenya’s manufacturing sector by applying a sample of
firms in the World Bank Enterprise Survey. Energy intensity is used as a proxy for energy efficiency while total
factor productivity is estimated using the Levinsohn-Petrin Algorithm. A dynamic panel data model is applied in
the analysis of the energy efficiency and total factor productivity relationship which is at the sub-sector and firm
size levels. The sub-sectors of concern are: chemicals, pharmaceuticals and plastics, food, textile and garments
and paper and other manufacturing sub-sectors. Firm sizes of interest are: small, medium and large. The findings
show heterogeneity in energy intensity across sub-sectors. Total factor productivity is also found to be
heterogeneous across sub-sectors and firms of different sizes. The estimates show that in general, energy efficiency
significantly promotes total factor productivity. Other factors that promote total factor productivity include capital
intensity, age, size, top manager’s years of experience, foreign ownership and exporting status. However, the effect
of these variables varies across the sub-sectors and firm sizes. The study findings suggest that policies to improve
energy efficiency should be accorded additional emphasis jointly with improvements in total factor productivity.
Description
A Research Article in the Journal of Sustainable Development
Keywords
Energy efficiency, Total factor productivity, Manufacturing sector
Citation
Macharia, K. K., Ngui, D., & Gathiaka, J. K. (2022). Effects of Energy Efficiency on Firm Productivity in Kenya’s Manufacturing Sector. Journal of Sustainable Development, 15(3), 1-90.