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The Capital-Energy Complementarity Debate Revisited

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  • Solow, John L

Abstract

This paper argues that the empirical disagreement as to whether capital and energy are complements or substitutes is not likely to be reconciled with aggregate data. It demonstrates that price-induced changes in the composition of output can cause either outcome in the aggregate, even if no technical substitution is possible. Substitution by consumers and changes in the relative incomes of consumers and foreigners are identified as key factors in determining which outcome arises. Copyright 1987 by American Economic Association.

Suggested Citation

  • Solow, John L, 1987. "The Capital-Energy Complementarity Debate Revisited," American Economic Review, American Economic Association, vol. 77(4), pages 605-614, September.
  • Handle: RePEc:aea:aecrev:v:77:y:1987:i:4:p:605-14
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    Cited by:

    1. Zhang, Fan, 2013. "The energy transition of the transition economies: An empirical analysis," Energy Economics, Elsevier, vol. 40(C), pages 679-686.
    2. Haller, Stefanie A. & Hyland, Marie, 2014. "Capital–energy substitution: Evidence from a panel of Irish manufacturing firms," Energy Economics, Elsevier, vol. 45(C), pages 501-510.
    3. Bretschger, Lucas, 2015. "Energy prices, growth, and the channels in between: Theory and evidence," Resource and Energy Economics, Elsevier, vol. 39(C), pages 29-52.
    4. Ziesemer, Thomas, 1995. "Reconciling environmental policy with employment, international competitiveness and participation requirements," Research Memorandum 016, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    5. Edward Kokkelenberg & Sang Nguyen, 1989. "Modeling technical progress and total factor productivity: A plant level example," Journal of Productivity Analysis, Springer, vol. 1(1), pages 21-42, March.
    6. Suraratdecha, Chutima & Okunade, Albert A., 2006. "Measuring operational efficiency in a health care system: A case study from Thailand," Health Policy, Elsevier, vol. 77(1), pages 2-23, June.
    7. Sang V Nguyen & Mary L Streitwieser, 1997. "Capital-Energy Substitution Revisted: New Evidence From Micro Data," Working Papers 97-4, Center for Economic Studies, U.S. Census Bureau.
    8. Zha, Donglan & Ding, Ning, 2014. "Elasticities of substitution between energy and non-energy inputs in China power sector," Economic Modelling, Elsevier, vol. 38(C), pages 564-571.
    9. Nguyen, Sang V & Streitwieser, Mary L, 1999. "Factor Substitution in U.S. Manufacturing: Does Plant Size Matter?," Small Business Economics, Springer, vol. 12(1), pages 41-57, February.
    10. Shigehara, Kumiharu, 1992. "Causes of declining growth in industrialized countries," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 15-39.
    11. Okushima, Shinichiro & Tamura, Makoto, 2007. "Multiple calibration decomposition analysis: Energy use and carbon dioxide emissions in the Japanese economy, 1970-1995," Energy Policy, Elsevier, vol. 35(10), pages 5156-5170, October.
    12. Andrei Polbin & Sergey Drobyshevsky, 2014. "Developing a Dynamic Stochastic Model of General Equilibrium for the Russian Economy," Research Paper Series, Gaidar Institute for Economic Policy, issue 166P, pages 156-156.
    13. Halkos, George & Tzeremes, Nickolaos, 2011. "The effect of energy consumption on countries’ economic efficiency: a conditional robust non parametric approach," MPRA Paper 28692, University Library of Munich, Germany.
    14. Bardazzi, Rossella & Oropallo, Filippo & Pazienza, Maria Grazia, 2015. "Do manufacturing firms react to energy prices? Evidence from Italy," Energy Economics, Elsevier, vol. 49(C), pages 168-181.
    15. Mark E Doms, 1993. "Energy Intensity, Electricity Consumption, and Advanced Manufacturing Technology Usage," Working Papers 93-9, Center for Economic Studies, U.S. Census Bureau.
    16. Arnberg, Soren & Bjorner, Thomas Bue, 2007. "Substitution between energy, capital and labour within industrial companies: A micro panel data analysis," Resource and Energy Economics, Elsevier, vol. 29(2), pages 122-136, May.
    17. van Zon, Adriaan & Yetkiner, I. Hakan, 2003. "An endogenous growth model with embodied energy-saving technical change," Resource and Energy Economics, Elsevier, vol. 25(1), pages 81-103, February.
    18. repec:spr:sjecst:v:154:y:2018:i:1:d:10.1186_s41937-017-0016-5 is not listed on IDEAS
    19. repec:eco:journ2:2018-02-5 is not listed on IDEAS
    20. Lecca, Patrizio & Swales, Kim & Turner, Karen, 2011. "An investigation of issues relating to where energy should enter the production function," Economic Modelling, Elsevier, vol. 28(6), pages 2832-2841.
    21. Sang V Nguyen & Robert H Mcguckin, 1988. "Public Use Microdata: Disclosure And Usefulness," Working Papers 88-3, Center for Economic Studies, U.S. Census Bureau.
    22. Richard B. Howarth, 1997. "Energy Efficiency And Economic Growth," Contemporary Economic Policy, Western Economic Association International, vol. 15(4), pages 1-9, October.
    23. Keting Shen & John Whalley, 2013. "Capital-Labor-Energy Substitution in Nested CES Production Functions for China," NBER Working Papers 19104, National Bureau of Economic Research, Inc.
    24. Zha, Donglan & Ding, Ning, 2015. "Threshold characteristic of energy efficiency on substitution between energy and non-energy factors," Economic Modelling, Elsevier, vol. 46(C), pages 180-187.
    25. repec:eee:eneeco:v:64:y:2017:i:c:p:118-130 is not listed on IDEAS

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