renewable energy, employment multiplier, green stimulus, shift-share

C26, H50, P18, Q20, Q43, Q52

The success of the green transition depends on the rapid and sustained adoption of renewable energy (RE) technologies. This paper uses a novel and detailed geo-localized dataset of RE power units deployment, across four technologies and spanning three decades, to empirically analyze the employment impacts of RE investments across European regional economies. To address the non-random deployment of renewable energy technologies, we exploit the regional physical potential for RE sources and construct an instrument for the regional exposure to technology-specific investments that is arguably exogenous to confounding economic factors. We find that the deployment of renewable energy plants has a positive and long-lasting impact on employment, generating about 40 jobs in seven years for each additional megawatt of generation capacity, primarily in the construction and agricultural sectors. We find evidence of geographical spillovers and substantial heterogeneity, with rural and low-income areas experiencing larger gains from RE deployment. The effects extend to regional output, with an RE investment multiplier exceeding unity over a 5-year horizon. Overall, these type of investments can represent an effective policy to spur local jobs and encourage rural development.