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ABSTRACT
This paper attempts to estimate the economic value of electricity in the Korean manufacturing industry by employing the concept of the value of marginal product (VMP). This paper uses data on 732 factories surveyed in 2011 and considers two types of production functions: the Cobb–Douglas and trans-log functions. The specification test indicates that the trans-log function is more appropriate for estimating the VMP. The VMP of industrial electricity is estimated to be KRW 239 (USD 0.22) per kWh. Given that the average price of industrial electricity was KRW 76.6 (USD 0.07) per kWh in 2010, the computed VMP is three times as large as the price.