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Factor substitution in Swiss manufacturing: empirical evidence using micro panel data

Author

Listed:
  • Sebastian M. Deininger

    (Basel Chamber of Commerce)

  • Lukas Mohler

    (University of Basel)

  • Daniel Mueller

    (Economist, Secretariat of the Swiss Competition Commission)

Abstract

This paper analyzes the relationship between factor substitutability and the energy intensity of manufacturing firms. Specifically, we compare the degree of substitutability between the input factors capital, labor, energy, and material for firms with low, medium, and high energy cost shares using a panel of Swiss manufacturing companies covering the period from 1997 to 2008. Our findings indicate substitutability between almost all production factors with one notable exception. Energy and capital are complements in the energy-intensive firm sample: A 1% increase in energy prices decreases capital use by 0.09%. We show that this complementarity is gradually increasing in the energy intensity of firms and draft important policy implications.

Suggested Citation

  • Sebastian M. Deininger & Lukas Mohler & Daniel Mueller, 2018. "Factor substitution in Swiss manufacturing: empirical evidence using micro panel data," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 154(1), pages 1-15, December.
    • Handle: RePEc:spr:sjecst:v:154:y:2018:i:1:d:10.1186_s41937-017-0016-5
    DOI: 10.1186/s41937-017-0016-5
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    References listed on IDEAS

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    Cited by:

    1. Zarepour, Z. & Wagner, N., 2022. "How manufacturing firms respond to energy subsidy reforms?," ISS Working Papers - General Series 696, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    2. Zarepour, Zahra & Wagner, Natascha, 2023. "How manufacturing firms respond to energy subsidy reforms? An impact assessment of the Iranian Energy Subsidy Reform," Energy Economics, Elsevier, vol. 124(C).

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    More about this item

    Keywords

    Substitution elasticities; Complementarity; Swiss manufacturing; Micro panel data; Linear logit; Translog;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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