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Plants, Vintage Capital and Energy Use

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  • Luis A. Puch

    (FEDEA)

  • Antonia Díaz

    (Universidad Carlos III)

Abstract

This paper studies the aggregate effects of rising prices of energy. We do this in two different macroeconomic models of energy use at the plant level. In the first one, capital cannot be reallocated from plants that use more energy intensive technologies to plants that use more energy saving technologies. In the second model, capital can be freely reallocated across plants but subject to adjustment costs. First, we illustrate the connections between the alternative assumptions on the technology. Then we show how to reinterpret the results obtained with these plant models in terms of vintage capital, and thus, obsolescence. Finally, we evaluate the response of the two models, calibrated to US and EU data, to alternative scenarios for energy price shocks in the years to come.

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File URL: http://www.economicdynamics.org/meetpapers/2007/paper_411.pdf
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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 411.

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Date of creation: 2007
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Handle: RePEc:red:sed007:411

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  1. Luis A. Puch & Antonia Díaz & María D. Guilló, 2001. "Costly Capital Reallocation And Energy Use," Economics Working Papers we015215, Universidad Carlos III, Departamento de Economía.
  2. Andrew Atkeson & Patrick J. Kehoe, 1994. "Models of Energy Use: Putty-Putty versus Putty-Clay," NBER Working Papers 4833, National Bureau of Economic Research, Inc.
  3. Jess Benhabib & Aldo Rustichini, 1990. "Vintage Capital, Investment and Growth," Discussion Papers 886, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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