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Electricity demand of manufacturing sector in Turkey: A translog cost approach

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  • Bölük, Gülden
  • Koç, A. Ali
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    Abstract

    This paper models factor demand for manufacturing sector in Turkey. We estimated a translog cost function with four factor consist of capital, labor, intermediate input and electricity over the 1980-2001. Our objective, taking in the consideration electricity as production input, was twofold: on the one hand, to estimate the price elasticity of electricity demand in manufacturing sector, and on the other hand to use cross-price and Morishima Elasticities of Substitution results for structural analysis regarding effects of electricity liberalization which initiated in 2001. Empirical result shows that electricity demand is relatively price sensitive (-Â 0.85). Our result in terms of electricity price is consistent with the previous studies. While electricity-labor and electricity-capital inputs are complementary, results indicate the existence of substitution possibilities between electricity and intermediate input. This means that changes in electricity prices have impact on labor demand and investment demand. These results have important implications for public policy.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 32 (2010)
    Issue (Month): 3 (May)
    Pages: 609-615

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    Handle: RePEc:eee:eneeco:v:32:y:2010:i:3:p:609-615

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    Web page: http://www.elsevier.com/locate/eneco

    Related research

    Keywords: Electricity market reform impact Electricity factor demand Inter-factor substitution Translog cost function Input demand in manufacturing;

    References

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    1. Medina, J. & Vega-Cervera, J. A., 2001. "Energy and the non-energy inputs substitution: evidence for Italy, Portugal and Spain," Applied Energy, Elsevier, vol. 68(2), pages 203-214, February.
    2. J. R. Moroney & John M. Trapani, 1981. "Factor Demand and Substitution in Mineral-Intensive Industries," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 272-284, Spring.
    3. Héctor Salgado Banda & Lorenzo E. Bernal Verdugo, 2007. "Translog Cost Functions: An Application for Mexican Manufacturing," Working Papers 2007-08, Banco de México.
    4. Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-68, August.
    5. Sterner, Thomas, 1989. " Factor Demand and Substitution in a Developing Country: Energy Use in Mexican Manufacturing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 91(4), pages 723-39.
    6. Ulusoy, Ali & Oguz, Fuat, 2007. "The privatization of electricity distribution in Turkey: A legal and economic analysis," Energy Policy, Elsevier, vol. 35(10), pages 5021-5034, October.
    7. Chung, Jae Wan, 1987. "On the Estimation of Factor Substitution in the Translog Model," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 409-17, August.
    8. Altinay, Galip & Karagol, Erdal, 2005. "Electricity consumption and economic growth: Evidence from Turkey," Energy Economics, Elsevier, vol. 27(6), pages 849-856, November.
    9. Bahçe, Serdal & Taymaz, Erol, 2008. "The impact of electricity market liberalization in Turkey: "Free consumer" and distributional monopoly cases," Energy Economics, Elsevier, vol. 30(4), pages 1603-1624, July.
    10. Iqbal, Mahmood, 1986. "Substitution of Labour, Capital and Energy in the Manufacturing Sector of Pakistan," Empirical Economics, Springer, vol. 11(2), pages 81-95.
    11. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    12. Erdogdu, Erkan, 2007. "Regulatory Reform in Turkish Energy Industry: An analysis," MPRA Paper 19100, University Library of Munich, Germany.
    13. Frank H. Fuller & A. Ali Koc & Haydar S. Sengul & Ahmet Bayaner, 1999. "Farm-Level Feed Demand in Turkey," Food and Agricultural Policy Research Institute (FAPRI) Publications 99-wp226, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    14. Urga, Giovanni & Walters, Chris, 2003. "Dynamic translog and linear logit models: a factor demand analysis of interfuel substitution in US industrial energy demand," Energy Economics, Elsevier, vol. 25(1), pages 1-21, January.
    15. Frank H. Fuller & A. Ali Koc & Haydar S. Sengul & Ahmet Bayaner, 1999. "Farm-Level Feed Demand in Turkey," Center for Agricultural and Rural Development (CARD) Publications 99-wp226, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    16. Fuller, Frank H., 1999. "Farm-Level Feed Demand In Turkey," 1999 Annual meeting, August 8-11, Nashville, TN 21534, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Christopoulos, Dimitris K., 2000. "The demand for energy in Greek manufacturing," Energy Economics, Elsevier, vol. 22(5), pages 569-586, October.
    18. Griffin, James M & Gregory, Paul R, 1976. "An Intercountry Translog Model of Energy Substitution Responses," American Economic Review, American Economic Association, vol. 66(5), pages 845-57, December.
    19. Cho, Won G. & Nam, Kiseok & Pagan, Jose A., 2004. "Economic growth and interfactor/interfuel substitution in Korea," Energy Economics, Elsevier, vol. 26(1), pages 31-50, January.
    20. Uri, Noel D, 1982. "The Demand for Energy in the United Kingdom," Bulletin of Economic Research, Wiley Blackwell, vol. 34(1), pages 43-56, May.
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    1. repec:eut:wpaper:01 is not listed on IDEAS
    2. Hossein Mirshojaeian Hosseini & Shinji Kaneko, 2013. "Fuel Conservation Effect of Energy Subsidy Reform in Iran," IDEC DP2 Series 3-1, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).

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