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The importance of energy price stickiness and real wage inflexibility for the time paths of rebound effects

Author

Listed:
  • Gioele Figus

    (Centre for Energy Policy, University of Strathclyde)

  • Peter McGregor

    (Department of Economics, University of Strathclyde)

  • J Kim Swales

    (Department of Economics, University of Strathclyde)

  • Karen Turner

    (Centre for Energy Policy, University of Strathclyde)

Abstract

There has been some controversy over the relative sizes of the short- and long-run rebound effects associated with energy efficiency improvements. Theoretical analysis by Wei (2007) and Saunders implied that the rebound effects would always be greater in the long-run than in the short-run. However, Allan et al (2007) and Turner (2009) found evidence from Computable General Equilibrium simulations that contradicted this result. In this paper we systematically explore the impact of energy price stickiness and real wage inflexibility for the evolution of rebound effects. We find that: the degree of energy price, but not wage, stickiness is an important determinant of the time path of rebound effects and of its relative size in the short- and long-runs; and that there is considerable variation in the scale of rebound effects through time, even where short-run rebound effects are lower than in the long-run. However, the most significant finding overall is that rebound reflects the system-wide interaction between energy producing and energy using sectors.

Suggested Citation

  • Gioele Figus & Peter McGregor & J Kim Swales & Karen Turner, 2018. "The importance of energy price stickiness and real wage inflexibility for the time paths of rebound effects," Working Papers 1804, University of Strathclyde Business School, Department of Economics.
    • Handle: RePEc:str:wpaper:1804
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    References listed on IDEAS

    as
    1. Turner, Karen, 2009. "Negative rebound and disinvestment effects in response to an improvement in energy efficiency in the UK economy," Energy Economics, Elsevier, vol. 31(5), pages 648-666, September.
    2. Adams, Philip D & Higgs, Peter J, 1990. "Calibration of Computable General Equilibrium Models from Synthetic Benchmark Equilibrium Data Sets," The Economic Record, The Economic Society of Australia, vol. 66(193), pages 110-126, June.
    3. Philip D. Adams & Peter J. Higgs, 1990. "Calibration of Computable General Equilibrium Models from Synthetic Benchmark Equilibrium Data Sets," The Economic Record, The Economic Society of Australia, vol. 66(2), pages 110-126, June.
    4. Wei, Taoyuan, 2007. "Impact of energy efficiency gains on output and energy use with Cobb-Douglas production function," Energy Policy, Elsevier, vol. 35(4), pages 2023-2030, April.
    5. 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.
    6. Saunders, Harry D., 2008. "Fuel conserving (and using) production functions," Energy Economics, Elsevier, vol. 30(5), pages 2184-2235, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    energy efficiency; evolution of eneregy rebound; price stickiness; real wage inflexibility;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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