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International Specialization, Structural Change and the Evolution of Manufacturing Energy Intensity in OECD Countries

We present new evidence that changes in sector structure explain a considerable and increasing part of Manufacturing energy intensity trends across 19 OECD countries. We show that cross-country convergence of Manufacturing energy intensity levels is caused by efficiency improvements in lagging countries, while undermined by increasing international differences in sector structure. Particularly, we find that efficiency-driven catching-up processes only began to dominate the diverging impact of structural changes after 1995, reversing gradual cross-country divergence of Manufacturing energy intensity levels into rapid convergence. Subsequently, we link sector structure dynamics to changing global production patterns under influence of international trade and specialization. We conclude that increasing trade and market integration helped reducing energy productivity gaps across countries, despite the contribution of increasing specialization to growing cross-country variation in sector structure. These trends are mainly driven by energy-intensive sectors, while various countries specialize in sectors for which they do not have a comparative energy productivity advantage.

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JEL Codes: Q41: Energy: Demand and Supply; Prices, Q43: Energy and the Macroeconomy, Q37: Nonrenewable Resources and Conservation: Issues in International Trade

Keywords: Convergence, Decomposition, Energy Intensity, Specialization, Structural Change, Trade

DOI: 10.5547/01956574.36.3.pmul

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Published in Volume 36, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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