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Costly capital reallocation and energy use

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In time series data, energy use does not change much with energy price changes. However, energy use is responsive to international differences in energy prices in cross-section data across countries. In this paper we consider a model of energy use in which production takes place at individual plants and capital can be used either to directly produce output or to reduce the energy required to run the planto We assume that reallocating capital from one use to another is costly. This turns out to be crucial for the quantitative properties of the model to be in conformity with the low short-mn and high long-run elasticities of energy use seen in data. Furthermore, our model displays variations in capacity utilization that are in line with those observed during the period of major oil price increases.

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Paper provided by Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico in its series Documentos de Trabajo del ICAE with number 0111.

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Date of creation: 2001
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Handle: RePEc:ucm:doicae:0111

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Keywords: Energy price; Energy use; Costly capital reallocation; Number of plants.;

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Cited by:
  1. Luis Puch & Antonia Díaz, 2012. "A Theory of Energy Use," 2012 Meeting Papers 802, Society for Economic Dynamics.
  2. Teresa Sousa, 2011. "International macroeconomic interdependence and imports of oil in a small open economy," Portuguese Economic Journal, Springer, vol. 10(1), pages 35-60, April.
  3. Claudia S. Gómez-López & Luis A. Puch, 2008. "Uso de Energía en Economías Exportadoras de Petróleo," Economic Reports 24-08, FEDEA.
  4. Luis A. Puch & Antonia Díaz, 2007. "Plants, Vintage Capital and Energy Use," 2007 Meeting Papers 411, Society for Economic Dynamics.
  5. Antonia Díaz & Luis A. Puch, 2013. "A theory of vintage capital investment and energy use," Economics Working Papers we1320, Universidad Carlos III, Departamento de Economía, revised Apr 2014.
  6. Federico Revelli, 2012. "Business taxation and economic performance in hierarchical government structures," Working Papers 2012/12, Institut d'Economia de Barcelona (IEB).
  7. Luisa Fernanda Gutierrez & Gustavo A. Marrero & Luis A. Puch, 2010. "Los efectos medioambientales del boom y el parón inmobiliario," Economic Reports 01-2010, FEDEA.
  8. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.

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