This paper uses a computable general equilibrium (CGE) framework to investigate the conditions under which rebound effects may occur in response to increases in energy efficiency in the UK national economy. Previous work for the UK has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero. The research reported in this paper involves carrying out a systematic sensitivity analysis, where relative price sensitivity is gradually introduced into the system, focusing specifically on elasticities of substitution in production and trade parameters, in order to determine conditions under which rebound effects become a likely outcome. The main result is that, while there is positive pressure for rebound effects even where (direct and indirect) demands for energy are very price inelastic, this may be partially or wholly offset by negative income, competitiveness and disinvestment effects, which also occur in response to falling energy price. The occurrence of disinvestment effects is of particular interest. These occur where falling energy prices reduce profitability in domestic energy supply sectors, leading to a contraction in capital stock in these sectors, which may in turn lead to rebound effects that are smaller in the long run than in the short run, a result that runs contrary to the predictions of previous theoretical work in this area.
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Paper provided by University of Strathclyde Business School, Department of Economics in its series Working Papers with number
09-02.
Find related papers by JEL classification: D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models R15 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
David G. Blanchflower & Andrew J. Oswald, 1990.
"The Wage Curve,"
NBER Working Papers
3181, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Blanchflower, D. & Oswald, A., 1989.
"The Wage Curve,"
Papers
340, London School of Economics - Centre for Labour Economics.
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