Modeling Energy and Non-energy Substitution – A Survey of Elasticities
AbstractEstimating the degree of substitution between energy and non-energy inputs is key for any evaluation of environmental and energy policies. Yet, given the large variety of substitution elasticities, the central question arises as to which measure would be most appropriate. Apparently, ALLEN’s elasticities of substitution have been the most-used measures in applied production analysis. In line with Frondel (2004), this paper argues that cross-price elasticities are preferable for many practical purposes. This conclusion is based on a survey of classical substitution measures, such as those from ALLEN, MORISHIMA, and MCFADDEN. The survey also highlights the fact that cross-price elasticities are their essential ingredients.
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Bibliographic InfoPaper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0256.
Length: 14 pages
Date of creation: Apr 2011
Date of revision:
Find related papers by JEL classification:
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
- D2 - Microeconomics - - Production and Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
- NEP-ENE-2011-06-18 (Energy Economics)
- NEP-ENV-2011-06-18 (Environmental Economics)
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