ABSTRACT
We have examined several ways in which energy price shocks can have an immediate adverse effect on the economy. The evidence con firms the argument that the direct effect of energy cost increases on production and employment is small. There is no evidence that more energy-intensive manufacturing industries sustained greater losses in output and employment than did less energy-intensive manufactur ing industries. Similarly, studies of factor productivity raise doubts about a connection between the energy price shocks and deteriorating productivity during the 1970s. Instead, factor productivity appears to have deteriorated broadly throughout the economy, much like the picture of declining output and employment across the manufacturing industries examined.
