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The underestimated contribution of energy to economic growth

Author

Listed:
  • Ayres, Robert U.
  • van den Bergh, Jeroen C.J.M.
  • Lindenberger, Dietmar
  • Warr, Benjamin

Abstract

Standard economic theory regards capital and labour as the main factors of production that satisfy the “cost-share theorem”. This paper argues that when a third factor, namely energy, is added physical constraints on substitution among the factors arise. We show that energy is a much more important factor of production than its small cost share may indicate. This implies that continued economic growth along the historical trend cannot safely be assumed, notably in view of considerably higher energy prices in the future due to peak oil and climate policy.

Suggested Citation

  • Ayres, Robert U. & van den Bergh, Jeroen C.J.M. & Lindenberger, Dietmar & Warr, Benjamin, 2013. "The underestimated contribution of energy to economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 27(C), pages 79-88.
  • Handle: RePEc:eee:streco:v:27:y:2013:i:c:p:79-88
    DOI: 10.1016/j.strueco.2013.07.004
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    More about this item

    Keywords

    Economic growth; Energy cost share; Technological constraints; Peak oil; Climate policy;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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