Plants, Vintage Capital and Energy Use
AbstractThis 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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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 411.
Date of creation: 2007
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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