<mark>electricity prices, energy intensity, and energy-efciency measures. The estmated coefcient on the double interacton between electricity prices and energy efciency measures suggests that, afer electricity price increases, frms that did not adopt energy efciency measures reduce employment signifcantly more than other frms. The triple interacton is also estmated as signifcantly negatve. Together with the double interacton, it delivers an efect that is economically almost three tmes as large as the respectve double interacton efect in Table 2—suggestng that, afer electricity prices increase, frms in energy-intensive sectors that did not adopt energy efciency measures are those that markedly reduce employment.</mark> An increase in electricity prices by 1 percent can lead to a reduction in employment by about 1.5 percent in firms within energy-intensive industries that have not adopted energy efficiency measures. Conversely, these energy-intensive firms tend to see an increase in sales and productivity by approximately 1.4 percent, regardless of whether they have or have not implemented energy efficiency measures. These findings suggest that promoting the adoption of energy efficiency measures among firms could serve as an important employment protection policy during periods of electricity price volatility, which developing countries might consider prioritizing.

The impact of energy subsidies, which could serve as a complementary policy to mitigate the effects of energy price increases, is further elucidated by incorporating double and triple interactions and considering a broader range of heterogeneity. <mark>Namely, the efect of electricity subsidies on sales and productvity remains positve, and the efect of petroleum subsidies on sales and productvity becomes signifcantly negatve. Both electricity and petroleum negatvely afect employment but only the efect of electricity is statstcally signifcant, at the 1 percent level. Our results suggest that using energy subsidies to preserve employment during energy price shocks can be a counterproductve policy strategy. This result aligns with the literature and the possible negatve efect of subsidies on the pace of structural adjustment and the long-term distortonary efect of employment. Such subsidies can distort market signals to both consumers and frms, leading to inefcient energy consumpton, misdirected investments, misallocaton of resources, and future resilience to energy price shocks (Coady et al., 2024; Aldasoro & Faia, 2024; Coady et al., 2024). This inefciency can hinder economic growth and delay necessary adjustments to energy price changes. Furthermore, energy subsidies can strain public fnances, limitng the government's ability to invest in other critcal areas that support employment and economic growth (Clements et al., 2024).</mark> <mark>Finally, we explore the correlaton between country-level energy subsidies and the frm-level adopton of energy efciency measures. Table 4 reports the estmaton results, which suggest that the short-term (oneyear-lagged (t-1)) and medium-term (the preceding fve-year average (t-1 ... t-5)) subsidies signifcantly discourage frms from adoptng energy efciency measures—with the regression controlling for frm size, subsector, and country’s economic development. The medium-term efect of petroleum subsidies comes out as the strongest. However, even the short-term efect of petroleum and electricity subsidies is consistently signifcantly negatve, highlightng that even short-term subsidies can delay the much-needed structural adjustment when possibly sustained energy price shocks hit countries, industries, and frms. These estmated correlatons align with the literature highlightng that short- and medium-term subsidies negatvely impact energy efciency adopton (Stefanski, 2024; Davis, 2023). Subsidized frms ofen delay technological investments, worsening inefciencies (Van den Bergh & Delarue, 2023). Subsidies risk longterm harm to growth and employment.</mark>

> **5. Robustness checks**

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