Research

We study how firms adjust to a sudden energy shock, and how access to credit could govern the employment response. Our empirical strategy is three-pronged: first, we exploit a natural experiment generating spatially heterogeneous electricity-price spikes across Mexican municipalities, linked to credit-registry, employer-employee, and balance-sheet data; second, we collect primary data from an original survey we designed and the Central Bank of Mexico fielded; and third, we build a dynamic structural model of firms' labor and energy choices with a working-capital constraint. We establish three findings: higher energy prices raise employment at larger, formal firms; this response is weaker for firms with prior credit access, which smooth the shock by extending credit lines; and exposed firms accumulate leverage and shrink their asset base over time. Survey evidence shows firms reorganize toward off-peak production and replace energy-intensive machinery, and the aggregate response is reallocative, from small, informal firms that exit to larger, formal survivors. The structural model rationalizes these patterns and implies that broad energy subsidies are poorly targeted, offering the least relief to the credit-constrained firms that respond most, whereas extending credit to those firms addresses the friction directly.

We study how climate transition risk shapes corporate bankruptcy. We construct a novel dataset linking U.S. bankruptcies to environmental violations, facility-level emissions, and satellite-derived vegetation health. We find that firms facing higher transition risk are more prone to distress and bankruptcy. By exploiting quasi-random judge assignment, we find that judges who are lenient toward carbon-intensive firms are more likely to approve reorganizations and grant greater debt relief. After bankruptcy, these firms increase emissions and degrade local vegetation, revealing a trade-off between financial restructuring and environmental quality. 

We provide systematic evidence on the environmental consequences of corporate mergers. We model two competing channels: a market power channel that contracts output and a green technology channel that internalizes the returns to abatement. We test their distinct predictions by linking European mergers to facility-level pollution, firm financials, and patent records, and applying a Sun–Abraham staggered difference-in-differences design, exploiting the differential timing of merger completion across treated firms and using canceled deals as a quasi-experimental control. We show that completed mergers reduce facility-level CO2 emissions and emission intensity (CO2 per unit of revenue), while turnover and employment are unchanged. The reductions are concentrated in high-carbon intensity firms that also raise green and process patenting, consistent with the green technology channel. In carbon-priced industries, mergers thus reduce emissions through efficiency rather than output contraction. The channel is within-facility decarbonization and faster diffusion of cleaner production technology, not system-wide CO2 abatement.

What is the impact of energy price shocks on jobs? This paper examines how an increase in energy prices affects employment using the 2022 energy price crisis as a natural setting. While interesting in its own right it is also indicative of the employment effects of further carbon pricing which - like the 2022 fuel price shock - lead to an increase of carbon intensive fossil fuels such as oil and gas. While the sharp price increase of 2022 induced by the Russian attack on Ukraine was largely uniform across firms, we derive its impact by examining the differential employment response of firms with varying cross price elasticities between energy and employment. Thus we use a shift-share design where the energy price shock becomes the shift and cross price elasticities are the shares. Using the energy crisis of 2022 as a natural setting and detailed administrative UK firm-level data, we exploit variation in firms’ energy dependence by combining two measures of exposure: cross price elasticities between labor and energy, and energy cost shares. We estimate the heterogeneous impacts of rising energy costs on firms’ employment decisions. Our results show that higher energy prices led to modest job losses, with less than one percent of jobs in our sample lost over 2022 and 2023 due to increased energy costs. However, the impact was far from uniform. The contraction in employment is concentrated in energy intensive sectors such as Electricity and Gas, Water and Waste, and Transportation, and is particularly evident in rural and peripheral regions where labor markets are less flexible and alternative job opportunities are limited. We also find that mid-sized firms bear a disproportionate share of the employment adjustment compared to both small and very large firms. These findings show how energy price volatility can generate uneven effects across sectors, regions, and firm sizes, highlighting the importance of targeted policy responses such as energy price stabilisation and support for workforce mobility to help reduce adverse labor market impacts during periods of energy price shocks.