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Energy Prices, Growth and the Channels Imbetween: Theory and evidence

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  • Lucas Bretschger

Abstract

The paper develops a theoretical model with different channels through which energy affects economic growth. The conditions for a crowding out of capital accumulation by intensive energy use are derived. In the empirical part, estimations using a system with five simultaneous equations for a sample of 37 developed countries with five-year average panel data over the period 1975-2004 are presented. It is shown that in the long run rising energy prices are not a threat to development. On the contrary, we find conditions under which decreasing energy input induces investments in physical and knowledge capital. A ten percent increase in energy prices is found to raise the growth rate by 0.4 percentage points.

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Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 034.

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Date of creation: 2010
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Handle: RePEc:oxf:oxcrwp:034

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Keywords: Energy Prices and Growth; Endogenous Capital Accumulation; Structural Change; Panel Data;

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Cited by:
  1. Grimaud, André & Magné, Bertrand & Rougé, Luc, 2009. "Polluting Non-Renewable Resources, Carbon Abatement and Climate Policy in a Romer Growth Model," TSE Working Papers 09-023, Toulouse School of Economics (TSE).
  2. Lucas Bretschger, 2010. "Sustainability economics, resource efficiency, and the Green New Deal," International Economics and Economic Policy, Springer, vol. 7(2), pages 187-202, August.

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