Belgium is losing manufacturing jobs and it is losing these jobs at a faster
pace compared to most other European countries. Whilst the impact of
labour costs on the competitiveness of our industry is much debated and
documented, the impact of the price of electricity remains unquantified.
Using data of 10 European, highly industrialised countries, we estimate the
impact of electricity prices on jobs and investment in Belgian manufacturing.
We estimate that the elasticity of employment with respect to the electricity
price is on average -0.30 and the elasticity of investment equals on average -
0.55. This means that a drop in the price of electricity of 1% would lead,
holding all other things equal, to 0.30% extra manufacturing jobs and 0.55%
extra manufacturing investment. Our findings are robust to different
calculation methods.
Others have estimated that electricity prices in Belgium are 10%-35% higher
than in the neighbouring countries. Combining this information with the
estimated elasticities, we calculate a price drop of 10% of the Belgian
electricity price would lead within the manufacturing industry to an increase
of 12,000 full-time jobs and an increase of €550 Million in yearly investment.
These numbers are likely to be an underestimation of the impact. We take a
conservative stance on the price handicap and Belgium has historically
specialised in the most electricity intensive sectors. Furthermore, our
approach does not quantify spillovers to other manufacturing nor services
industries.status: publishe