Advanced Search
MyIDEAS: Login

The Role of Energy in the Industrial Revolution and Modern Economic Growth

Contents:

Author Info

  • David I. Stern

    ()

  • Astrid Kander

    ()

Abstract

The expansion in the supply of energy services over the last couple of centuries has reduced the apparent importance of energy in economic growth despite energy being an essential production input. We demonstrate this by developing a simple extension of the Solow growth model, which we use to investigate 200 years of Swedish data. We find that the elasticity of substitution between a capital-labor aggregate and energy is less than unity, which implies that when energy services are scarce they strongly constrain output growth resulting in a Malthusian steady-state. When energy services are abundant the economy exhibits the behavior of the “modern growth regime” with the Solow model as a limiting case. The expansion of energy services is found to be a major factor in explaining the industrial revolution and economic growth in Sweden, especially before the second half of the 20th century. In the latter period, labor-augmenting technological change becomes the dominant factor driving growth.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://cama.crawford.anu.edu.au/pdf/working-papers/2011/012011.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2011-01.

as in new window
Length: 37 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:een:camaaa:2011-01

Contact details of provider:
Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 0200
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Email:
Web page: http://cama.crawford.anu.edu.au
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Myllyntaus, Timo & Mattila, Timo, 2002. "Decline or increase? The standing timber stock in Finland, 1800-1997," Ecological Economics, Elsevier, vol. 41(2), pages 271-288, May.
  2. Jakob B. Madsen & James B. Ang & Rajabrata Banerjee, 2010. "Four Centuries of British Economic Growth: The Roles of Technology and Population," Development Research Unit Working Paper Series 03-10, Monash University, Department of Economics.
  3. Stern, David I., 1997. "Limits to substitution and irreversibility in production and consumption: A neoclassical interpretation of ecological economics," Ecological Economics, Elsevier, vol. 21(3), pages 197-215, June.
  4. Gary D. Hansen & Edward C. Prescott, 1998. "Malthus to Solow," NBER Working Papers 6858, National Bureau of Economic Research, Inc.
  5. Stern, David I., 2012. "Modeling international trends in energy efficiency," Energy Economics, Elsevier, vol. 34(6), pages 2200-2208.
  6. Wrigley,E. A., 2010. "Energy and the English Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521131858, October.
  7. Ayres, Robert U. & Warr, Benjamin, 2005. "Accounting for growth: the role of physical work," Structural Change and Economic Dynamics, Elsevier, vol. 16(2), pages 181-209, June.
  8. Galor, Oded, 2004. "From Stagnation to Growth: Unified Growth Theory," CEPR Discussion Papers 4581, C.E.P.R. Discussion Papers.
  9. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January.
  10. Jones Charles I., 2001. "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(2), pages 1-45, August.
  11. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  12. Chirinko, Robert S., 2008. "[sigma]: The long and short of it," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 671-686, June.
  13. Madsen, Jakob & Ang, James & Banerjee, Rajabrata, 2010. "Four Centuries of British Economic Growth: The Roles of Technology and Population," MPRA Paper 23510, University Library of Munich, Germany.
  14. Robert S. Chirinko, 2008. "ó: The Long And Short Of It," CESifo Working Paper Series 2234, CESifo Group Munich.
  15. Smulders, J.A. & Nooij, M. de, 2003. "The impact of energy conservation on technology and economic growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-123121, Tilburg University.
  16. Brock,W.A. & Taylor,M.S., 2004. "The Green Solow model," Working papers 16, Wisconsin Madison - Social Systems.
  17. Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, vol. 10(01), pages 91-115, March.
  18. Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
  19. Barelli, Paulo & Pessoa, Samuel de Abreu, 2003. "Inada conditions imply that production function must be asymptotically Cobb-Douglas," Economics Working Papers (Ensaios Economicos da EPGE) 477, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  20. Allen,Robert C., 2009. "The British Industrial Revolution in Global Perspective," Cambridge Books, Cambridge University Press, number 9780521868273, October.
  21. Barelli, Paulo & de Abreu Pessoa, Samuel, 2003. "Inada conditions imply that production function must be asymptotically Cobb-Douglas," Economics Letters, Elsevier, vol. 81(3), pages 361-363, December.
  22. Beverly Hirtle, 2008. "Credit derivatives and bank credit supply," Staff Reports 276, Federal Reserve Bank of New York.
  23. Roger Fouquet & Peter J.G. Pearson, 2006. "Seven Centuries of Energy Services: The Price and Use of Light in the United Kingdom (1300-2000)," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 139-178.
  24. Matt Benge & Graeme Wells, 2002. "Growth and the Current Account in a Small Open Economy," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(2), pages 152-165, January.
  25. Stern, David I., 2000. "A multivariate cointegration analysis of the role of energy in the US macroeconomy," Energy Economics, Elsevier, vol. 22(2), pages 267-283, April.
  26. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
  27. Tahvonen, Olli & Salo, Seppo, 2001. "Economic growth and transitions between renewable and nonrenewable energy resources," European Economic Review, Elsevier, vol. 45(8), pages 1379-1398, August.
  28. Di Maria, Corrado & Valente, Simone, 2008. "Hicks meets Hotelling: the direction of technical change in capital–resource economies," Environment and Development Economics, Cambridge University Press, vol. 13(06), pages 691-717, December.
  29. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World
    [A Farewell to Alms: A Brief Economic History of the World]
    ," Introductory Chapters, Princeton University Press.
  30. Mark J. Koetse & Henri L.F. de Groot & Raymond J.G.M. Florax, 2006. "Capital-Energy Substitution and Shifts in Factor Demand: A Meta-Analysis," Tinbergen Institute Discussion Papers 06-061/3, Tinbergen Institute.
  31. Choi, In & Saikkonen, Pentti, 2010. "Tests For Nonlinear Cointegration," Econometric Theory, Cambridge University Press, vol. 26(03), pages 682-709, June.
  32. repec:cup:cbooks:9780521766937 is not listed on IDEAS
  33. Kim, H Youn, 1992. "The Translog Production Function and Variable Returns to Scale," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 546-52, August.
  34. Cleveland, Cutler J. & Kaufmann, Robert K. & Stern, David I., 2000. "Aggregation and the role of energy in the economy," Ecological Economics, Elsevier, vol. 32(2), pages 301-317, February.
  35. Ernst Berndt & Charles Kolstad & Jong-Kun Lee, 1993. "Measuring the Energy Efficiency and Productivity Impacts of Embodied Technical Change," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 33-56.
  36. Stern, David I., 2002. "Explaining changes in global sulfur emissions: an econometric decomposition approach," Ecological Economics, Elsevier, vol. 42(1-2), pages 201-220, August.
  37. Stern, David I., 1993. "Energy and economic growth in the USA : A multivariate approach," Energy Economics, Elsevier, vol. 15(2), pages 137-150, April.
  38. Larry E. Jones & Rodolfo E. Manuelli, 2000. "Endogenous policy choice: the case of pollution and growth," Staff Report 276, Federal Reserve Bank of Minneapolis.
  39. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Final Versions of Two Papers Published
    by David Stern in Stochastic Trend on 2012-07-06 01:56:00
  2. Power to the People
    by noreply@blogger.com (David Stern) in Stochastic Trend on 2014-01-15 23:38:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. John Foster, 2013. "Energy, Knowledge and Economic Growth," Papers on Economics and Evolution 2013-01, Max Planck Institute of Economics, Evolutionary Economics Group.
  2. Zsuzsanna Csereklyei & Stefan Humer, 2012. "Modelling Primary Energy Consumption under Model Uncertainty," Department of Economics Working Papers wuwp147, Vienna University of Economics, Department of Economics.
  3. David I. Stern, 2010. "The Role of Energy in Economic Growth," CCEP Working Papers 0310, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  4. David I. Stern, 2011. "From Correlation to Granger Causality," Crawford School Research Papers 1113, Crawford School of Public Policy, The Australian National University.
  5. Farhani, Sahbi & Shahbaz, Muhammad & Sbia, Rashid, 2013. "What is MENA Region Initially Needed: Grow Output or Mitigate CO2 Emissions?," MPRA Paper 48859, University Library of Munich, Germany, revised 05 Aug 2013.
  6. Stern, David & Enflo, Kerstin, 2013. "Causality Between Energy and Output in the Long-Run," Lund Papers in Economic History 126, Department of Economic History, Lund University.
  7. Antonelli,Cristiano & Gehringer, Agnieszka, 2013. "Demand pull and technological flows within innovation systems: the intra-European evidence," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201301, University of Turin.
  8. Martin de Wit & Matthew Kuperus Heun & Douglas J Crookes, 2013. "An overview of salient factors, relationships and values to support integrated energy-economic systems dynamic modelling," Working Papers 02/2013, Stellenbosch University, Department of Economics.
  9. Farhani, Sahbi & Shahbaz, Muhammad & Sbia, Rashid & Chaibi, Anissa, 2014. "What does MENA region initially need: Grow output or mitigate CO2 emissions?," Economic Modelling, Elsevier, vol. 38(C), pages 270-281.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2011-01. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cama Admin).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.