Aggregation of Capital and Its Substitution with Energy
Controversy continues over the question of whether capital and energy are substitutes or complements. The authors find that the answer to the question partly depends on the aggregation of building capital and machinery capital into an aggregate input called capital. The authors' empirical results reject this aggregation. When building and machinery capital are treated as separate inputs, they find that machinery capital and energy are substitutes, while building capital and energy are complements. For policy purposes, this result implies that a rise in the price of energy will reduce building capital formation, while it will increase machinery capital formation.
Volume (Year): 14 (1988)
Issue (Month): 3 (Jul-Sep)
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References listed on IDEAS
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.:
- Binswanger, Hans P, 1974.
"The Measurement of Technical Change Biases with Many Factors of Production,"
American Economic Review,
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- Paul A. Samuelson, 1962. "Parable and Realism in Capital Theory: The Surrogate Production Function," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 193-206. Full references (including those not matched with items on IDEAS)