Measuring the economic benefits of industrial Natural Gas use in South Korea

Natural gas (NG) is an important input used in the industrial production of South Korea. Therefore, the government requires quantitative information to be provided about the economic benefits of industrial NG (ING) use to decide whether to invest in expanding the supply of ING or not. This manuscript tries to measure the economic benefits of NG use in the manufacturing industry by using a specific case in South Korea. For this purpose, a trans-log production function is estimated using the data collected from a national survey of 1100 firms in South Korea. Of them, 299 firms used ING. For a representative manufacturing firm, the point estimated for the economic benefits of ING use is obtained as KRW 2409 (USD 2.07) per m³, which is statistically meaningful. The average price of ING, which is defined as the total expenditure on ING purchased in 2016 and divided by the total amount of ING purchased in 2016, was KRW667 (USD 0.57) per m³. Therefore, the economic benefits of ING use are 3.61 times as great as the average price of ING. This implies that ING produces more value than its price in South Korea.