IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v39y2013icp233-238.html
   My bibliography  Save this article

Energy substitution: When model selection depends on the focus

Author

Listed:
  • Behl, Peter
  • Dette, Holger
  • Frondel, Manuel
  • Tauchmann, Harald

Abstract

In contrast to conventional model selection criteria, the Focused Information Criterion (FIC) allows for the purpose-specific choice of model specifications. This accommodates the idea that one kind of model might be highly appropriate for inferences on a particular focus parameter, but not for another. Ever since its development, the FIC has been increasingly applied in the realm of statistics, but this concept appears to be virtually unknown in the literature on energy and production economics. Using the classical example of the Translog cost function and production data for 35 U.S. industry sectors (1960–2005), this paper provides for an empirical illustration of the FIC and demonstrates its usefulness in selecting production models, thereby focusing on the ease of substitution between energy and capital versus energy and labor.

Suggested Citation

  • Behl, Peter & Dette, Holger & Frondel, Manuel & Tauchmann, Harald, 2013. "Energy substitution: When model selection depends on the focus," Energy Economics, Elsevier, vol. 39(C), pages 233-238.
  • Handle: RePEc:eee:eneeco:v:39:y:2013:i:c:p:233-238
    DOI: 10.1016/j.eneco.2013.04.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988313000868
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.eneco.2013.04.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Manuel Frondel & Colin James Vance, 2012. "Interpreting the outcomes of two-part models," Applied Economics Letters, Taylor & Francis Journals, vol. 19(10), pages 987-992, July.
    2. Manuel Frondel & Christoph M. Schmidt, 2006. "The Empirical Assessment of Technology Differences: Comparing the Comparable," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 186-192, February.
    3. Behl, Peter & Dette, Holger & Frondel, Manuel & Tauchmann, Harald, 2012. "Choice is suffering: A Focused Information Criterion for model selection," Economic Modelling, Elsevier, vol. 29(3), pages 817-822.
    4. Frondel, Manuel & Schmidt, Christoph M., 2003. "Rejecting capital-skill complementarity at all costs," Economics Letters, Elsevier, vol. 80(1), pages 15-21, July.
    5. Fuss, Melvyn & McFadden, Daniel & Mundlak, Yair, 1978. "A Survey of Functional Forms in the Economic Analysis of Production," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.),Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 4, McMaster University Archive for the History of Economic Thought.
    6. Frondel, Manuel & Schmidt, Christoph M., 2004. "Facing the truth about separability: nothing works without energy," Ecological Economics, Elsevier, vol. 51(3-4), pages 217-223, December.
    7. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
    8. Kintis, Andreas A. & Panas, Epaminondas E., 1989. "The capital--energy controversy: further results," Energy Economics, Elsevier, vol. 11(3), pages 201-212, July.
    9. Christian T. Brownlees & Giampiero M. Gallo, 2008. "On Variable Selection for Volatility Forecasting: The Role of Focused Selection Criteria," Journal of Financial Econometrics, Oxford University Press, vol. 6(4), pages 513-539, Fall.
    10. Claeskens, Gerda & Hjort, Nils Lid, 2008. "Minimizing Average Risk In Regression Models," Econometric Theory, Cambridge University Press, vol. 24(2), pages 493-527, April.
    11. Holger Dette & Mark Podolskij & Mathias Vetter, 2006. "Estimation of Integrated Volatility in Continuous‐Time Financial Models with Applications to Goodness‐of‐Fit Testing," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 33(2), pages 259-278, June.
    12. 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.
    13. Dette, Holger & Podolskij, Mark, 2008. "Testing the parametric form of the volatility in continuous time diffusion models--a stochastic process approach," Journal of Econometrics, Elsevier, vol. 143(1), pages 56-73, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Behl, Peter & Dette, Holger & Frondel, Manuel & Vance, Colin, 2019. "A focused information criterion for quantile regression: Evidence for the rebound effect," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 223-227.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Behl, Peter & Dette, Holger & Frondel, Manuel & Tauchmann, Harald, 2011. "Being Focused: When the Purpose of Inference Matters for Model Selection," Ruhr Economic Papers 264, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Peter Behl & Holger Dette & Manuel Frondel & Harald Tauchmann, 2011. "Being Focused: When the Purpose of Inference Matters for Model Selection," Ruhr Economic Papers 0264, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. repec:zbw:rwirep:0264 is not listed on IDEAS
    4. Behl, Peter & Dette, Holger & Frondel, Manuel & Tauchmann, Harald, 2012. "Choice is suffering: A Focused Information Criterion for model selection," Economic Modelling, Elsevier, vol. 29(3), pages 817-822.
    5. Manuel Frondel & Peter Behl & Holger Dette & Harald Tauchmann, 2011. "Choice is Suffering: A Focused Information Criterion for Model Selection Activation Program for Disadvantaged Youths," Ruhr Economic Papers 0250, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. Frondel, Manuel, 2011. "Modelling energy and non-energy substitution: A brief survey of elasticities," Energy Policy, Elsevier, vol. 39(8), pages 4601-4604, August.
    7. repec:zbw:rwirep:0250 is not listed on IDEAS
    8. Frondel, Manuel, 2011. "Modeling Energy and Non-energy Substitution – A Survey of Elasticities," Ruhr Economic Papers 256, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Manuel Frondel, 2011. "Modeling Energy and Non-energy Substitution – A Survey of Elasticities," Ruhr Economic Papers 0256, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Behl, Peter & Dette, Holger & Frondel, Manuel & Vance, Colin, 2019. "A focused information criterion for quantile regression: Evidence for the rebound effect," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 223-227.
    11. repec:zbw:rwirep:0256 is not listed on IDEAS
    12. Frondel, Manuel & Schmidt, Christoph M., 2006. "On the Restrictiveness of Separability: The Significance of Energy in German Manufacturing," RWI Discussion Papers 38, RWI - Leibniz-Institut für Wirtschaftsforschung.
    13. Manuel Frondel & Christoph M. Schmidt, 2006. "On the Restrictiveness of Separability: The Significance of Energy in German Manufacturing," RWI Discussion Papers 0038, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
    14. repec:zbw:rwidps:0038 is not listed on IDEAS
    15. Kim Christensen & Ulrich Hounyo & Mark Podolskij, 2017. "Is the diurnal pattern sufficient to explain the intraday variation in volatility? A nonparametric assessment," CREATES Research Papers 2017-30, Department of Economics and Business Economics, Aarhus University.
    16. Manuel Frondel & Christoph M. Schmidt, 2006. "The Empirical Assessment of Technology Differences: Comparing the Comparable," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 186-192, February.
    17. Ole E. Barndorff-Nielsen & Mikko S. Pakkanen & Jürgen Schmiegel, 2013. "Assessing Relative Volatility/Intermittency/Energy Dissipation," CREATES Research Papers 2013-15, Department of Economics and Business Economics, Aarhus University.
    18. Mark Podolskij & Mathieu Rosenbaum, 2012. "Testing the local volatility assumption: a statistical approach," Annals of Finance, Springer, vol. 8(1), pages 31-48, February.
    19. Adam D. Bull, 2015. "Semimartingale detection and goodness-of-fit tests," Papers 1506.00088, arXiv.org, revised Jun 2016.
    20. Zha, Donglan & Zhou, Dequn, 2014. "The elasticity of substitution and the way of nesting CES production function with emphasis on energy input," Applied Energy, Elsevier, vol. 130(C), pages 793-798.
    21. Christensen, K. & Podolskij, M. & Thamrongrat, N. & Veliyev, B., 2017. "Inference from high-frequency data: A subsampling approach," Journal of Econometrics, Elsevier, vol. 197(2), pages 245-272.
    22. Christensen, Kim & Thyrsgaard, Martin & Veliyev, Bezirgen, 2019. "The realized empirical distribution function of stochastic variance with application to goodness-of-fit testing," Journal of Econometrics, Elsevier, vol. 212(2), pages 556-583.
    23. Qiang Liu & Zhi Liu & Chuanhai Zhang, 2020. "Heteroscedasticity test of high-frequency data with jumps and microstructure noise," Papers 2010.07659, arXiv.org.
    24. Torsten Schmidt & Tobias Zimmermann, 2012. "Energy Prices and Business Cycles: Lessons from a Simulated Small Open Economy Model," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2011(2), pages 29-47.

    More about this item

    Keywords

    Information criteria; Translog cost function; Cross-price elasticities;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • D2 - Microeconomics - - Production and Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:39:y:2013:i:c:p:233-238. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.