The Impact of the Green Energy Infrastructure on Firm Productivity: Evidence from the Three Gorges Project in the People’s Republic of China
Policy makers need to consider the broad benefits of green renewable energy beyond the conventional cost–benefit trade-off.
Despite the dominant role of hydropower in the global power generation mix and the popularity of studying the productivity impact of infrastructure investment, there is a lack of research regarding the impact of hydropower projects on firm productivity. Such a positive impact could promote a more ambitious action plan for mitigating carbon emissions. We investigate whether and how the People’s Republic of China’s Three Gorges Project (TGP), the world’s largest hydropower project, might affect the productivity of manufacturing firms in the province where the project is located. The empirical results statistically and economically reveal the significant positive impact of the TGP on manufacturing firms’ productivity, and various robustness checks confirm the soundness of our findings. We also verify the three channels, the capital deepening effect, the scale effect, and the competition effect, robustly. This productivity impact reveals that hydropower projects have one economic benefit in addition to the other well-known ones, such as flood control and an improvement of the shipping capacity. The findings imply that policy makers need to consider the broad benefits of green renewable energy beyond the conventional cost–benefit trade-off and could implement many green energy projects and technology that marginally fail to pass the cost–benefit analysis.
WORKING PAPER NO: 1075