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Costly Capital Reallocation And Energy Use

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  • Luis A. Puch

    ()

  • Antonia Díaz

    ()

  • María D. Guilló

Abstract

In 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 Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we015215.

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Date of creation: May 2001
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Handle: RePEc:cte:werepe:we015215

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  1. Patrick J. Kehoe & Andrew Atkeson, 1999. "Models of Energy Use: Putty-Putty versus Putty-Clay," American Economic Review, American Economic Association, vol. 89(4), pages 1028-1043, September.
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Cited by:
  1. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
  2. Luis Puch & Antonia Díaz, 2012. "A Theory of Energy Use," 2012 Meeting Papers 802, Society for Economic Dynamics.
  3. Luisa Fernanda Gutierrez & Gustavo A. Marrero & Luis A. Puch, 2010. "Los efectos medioambientales del boom y el parón inmobiliario," Economic Reports 01-2010, FEDEA.
  4. Claudia S. Gómez-López & Luis A. Puch, 2008. "Uso de Energía en Economías Exportadoras de Petróleo," Economic Reports 24-08, FEDEA.
  5. Antonia Díaz, & Luis A. Puch, 2013. "A Theory of Vintage Capital Investment and Energy Use," Documentos del Instituto Complutense de Análisis Económico 2013-35, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
  6. Luis A. Puch & Antonia Díaz, 2007. "Plants, Vintage Capital and Energy Use," 2007 Meeting Papers 411, Society for Economic Dynamics.
  7. Federico Revelli, 2012. "Business taxation and economic performance in hierarchical government structures," Working Papers 2012/12, Institut d'Economia de Barcelona (IEB).
  8. Teresa Sousa, 2011. "International macroeconomic interdependence and imports of oil in a small open economy," Portuguese Economic Journal, Springer, vol. 10(1), pages 35-60, April.

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