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Econometric estimation of nested production functions and testing in a computable general equilibrium analysis of economy-wide rebound effec ts

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  • Ha, Soo Jung
  • Lange, Ian
  • Lecca, Patrizio
  • Turner, Karen

Abstract

Quantitative models, such as computable general equilibrium (CGE), that are increasingly used to inform policy processes rely on a number of assumptions concerning how good and services are produced. Previous research has shown that the elasticity of substitution between inputs and the structure in which these inputs interact can have large impacts on model output. However, the choice of elasticities and production structure is often made without the support of statistical evidence. This research aims to address these points by estimating nesting structure and the elasticities of substitution therein across a number of sectors in the UK then testing the implications of introducing these estimates to parameterise a CGE model that is then used to simulation the economy-wide impacts of increased efficiency in the productive use of energy.

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Bibliographic Info

Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number 2012-08.

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Date of creation: May 2012
Date of revision:
Handle: RePEc:stl:stledp:2012-08

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Postal: Division of Economics, University of Stirling, Stirling, Scotland FK9 4LA
Phone: +44 (0)1786 467473
Fax: +44 (0)1786 467469
Web page: http://www.econ.stir.ac.uk/
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Keywords: separability assumptions; KLEM production function; general equilibriu m;

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  1. Saunders, Harry D., 2008. "Fuel conserving (and using) production functions," Energy Economics, Elsevier, vol. 30(5), pages 2184-2235, September.
  2. Allan, Grant & Hanley, Nick & McGregor, Peter & Swales, Kim & Turner, Karen, 2007. "The impact of increased efficiency in the industrial use of energy: A computable general equilibrium analysis for the United Kingdom," Energy Economics, Elsevier, vol. 29(4), pages 779-798, July.
  3. Anil Markandya & S. Pedroso, 2005. "How Substitutable is Natural Capital?," Working Papers 2005.88, Fondazione Eni Enrico Mattei.
  4. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  5. Lecca, Patrizio & Swales, J Kim & Turner, Karen, 2010. "An investigation of issues relating to where energy should enter the production function," Stirling Economics Discussion Papers 2010-18, University of Stirling, Division of Economics.
  6. Kemfert, Claudia, 1998. "Estimated substitution elasticities of a nested CES production function approach for Germany," Energy Economics, Elsevier, vol. 20(3), pages 249-264, June.
  7. Edwin van der Werf, 2007. "Production Functions for Climate Policy Modeling: An Empirical Analysis," Working Papers 2007.47, Fondazione Eni Enrico Mattei.
  8. Karen Turner, 2009. "Negative rebound and disinvestment effects in response to an improvement in energy efficiency in the UK economy," Working Papers 0902, University of Strathclyde Business School, Department of Economics.
  9. Lee C. Adkins & Dan S. Rickman & Abid Hameed, 2003. "Bayesian Estimation of Regional Production for CGE Modeling," Journal of Regional Science, Wiley Blackwell, vol. 43(4), pages 641-661.
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  11. Despotakis, Kostas A. & Fisher, Anthony C., 1988. "Energy in a regional economy: A computable general equilibrium model for california," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 313-330, September.
  12. Dimitropoulos, John, 2007. "Energy productivity improvements and the rebound effect: An overview of the state of knowledge," Energy Policy, Elsevier, vol. 35(12), pages 6354-6363, December.
  13. Saunders, Harry D., 2000. "A view from the macro side: rebound, backfire, and Khazzoom-Brookes," Energy Policy, Elsevier, vol. 28(6-7), pages 439-449, June.
  14. Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-68, August.
  15. Ray Barrell & Amanda Choy & Simon Kirby, 2006. "Globalisation and UK Trade," National Institute Economic Review, National Institute of Economic and Social Research, vol. 195(1), pages 63-67, January.
  16. Naqvi, Farzana, 1998. "A computable general equilibrium model of energy, economy and equity interactions in Pakistan," Energy Economics, Elsevier, vol. 20(4), pages 347-373, September.
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