Costly Capital Reallocation And Energy Use
AbstractIn thime series data, energy use does not change much with energy price changes. However, energy use is responsive to international differences in energy prices in cross-section data across countries. In this paper we consider a model of energy use in which production takes place at individual plants and capital can be used either to directly produce output or to reduce toe energy required to run the plant. We assume that reallocating capital from one use to another is costly. This turns out to be crucial for the quantitative properties of the model to be in conformity with the low short-run and high long-run elasticities of energy use seen in data. Furthermore, our model displays variations in capacity utilization that are in line with those observed during the period of major oil price increases.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we015215.
Date of creation: May 2001
Date of revision:
Other versions of this item:
- Antonia Díaz & Luis A. Puch & María D. Guilló, 2001. "Costly capital reallocation and energy use," Documentos del Instituto Complutense de AnÃ¡lisis EconÃ³mico 0111, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
- María Dolores Guilló & Antonia Díaz & Luis A. Puch, 2002. "Costly Capital Reallocation And Enery Use," Working Papers. Serie AD 2002-14, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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