Non-linear technological progress and the substitutability of energy for capital: an application using the translog cost function
AbstractThis paper analyses the production process of four industries over four separate time periods using datasets taken form Berndt and Wood (1975, 1979), Hunt (1984a, 1986), Norsworthy and Harper (1981) and Jorgensen and Stiroh (2000). In their initial paper Berndt and Wood failed to explore the alternative options available to them to represent technological progress, a deficiency noted by Hunt (1986) who tested for alternative representations of technology (inter alia) using the Berndt and Wood data. This paper extends this line of reasoning/research by allowing technological progress to take more flexible non-linear forms using both deterministic and stochastic trend models. The results reveal that ‘non-linear trend’ models are generally preferred to ‘linear trend’ or ‘no trend’ models hence raising a question over the validity of assumptions used in much previous empirical research. Further the results reveal that the different assumptions lead to different results for the energy-capital elasticity of substitution.
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Bibliographic InfoPaper provided by Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey in its series Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) with number 120.
Length: 24 pages
Date of creation: Jun 2008
Date of revision:
Publication status: Published in Economics Bulletin 30(1) 2010, pp. 84-93. (Revised Version)
Translog; energy-capital substitution; productivity;
Other versions of this item:
- David Clive Broadstock, 2010. "Non-linear technological progress and the substitutability of energy for capital: An application using the translog cost function," Economics Bulletin, AccessEcon, vol. 30(1), pages 84-93.
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-24 (All new papers)
- NEP-EFF-2009-01-24 (Efficiency & Productivity)
- NEP-ENE-2009-01-24 (Energy Economics)
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.:
- Mark J. Koetse & Henri L.F. de Groot & Raymond J.G.M. Florax, 2006.
"Capital-Energy Substitution and Shifts in Factor Demand: A Meta-Analysis,"
Tinbergen Institute Discussion Papers
06-061/3, Tinbergen Institute.
- Koetse, Mark J. & de Groot, Henri L.F. & Florax, Raymond J.G.M., 2008. "Capital-energy substitution and shifts in factor demand: A meta-analysis," Energy Economics, Elsevier, vol. 30(5), pages 2236-2251, September.
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- Manuel Frondel & Christoph M. Schmidt, 2002. "The Capital-Energy Controversy: An Artifact of Cost Shares?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 53-79.
- 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.
- Thompson, Henry, 2006. "The applied theory of energy substitution in production," Energy Economics, Elsevier, vol. 28(4), pages 410-425, July.
- Berndt, Ernst R & Wood, David O, 1979. "Engineering and Econometric Interpretations of Energy-Capital Complementarity," American Economic Review, American Economic Association, vol. 69(3), pages 342-54, June.
- Turnovsky, Michelle & Folie, Michael & Ulph, Alistair, 1982. "Factor Substitutability in Australian Manufacturing with Emphasis on Energy Inputs," The Economic Record, The Economic Society of Australia, vol. 58(160), pages 61-72, March.
- Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
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