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Industrial energy substitution and a revised Allen elasticity in China

Author

Listed:
  • LU Chengjun

    (Department of National Economic Management, School of Economics, Renmin University of China, Beijing 100872, China)

  • ZHOU Duanming

    (Department of National Economic Management, School of Economics, Renmin University of China, Beijing 100872, China)

Abstract

To overcome the drawbacks in estimating the rate of input substitution in existing econometric models, our paper is first to estimate the absolute/net rate of input substitution of capital and labor for energy in China¡¯s industrial sector. Based on trans-log cost function with constant elasticity of substitution and combined MES method with technology progress and output effect, our paper finds a significant substitution relationship between labor and energy and an uncertain substitution relationship between capital and energy with some complementary characteristics. Furthermore, technology progress and output effect are found to have enhanced the substitution of labor for energy in the past 30 years. Based on these empirical findings, constructive suggestions are made concerning the medium and long-term development strategy of energy in China¡¯s industrial sector.

Suggested Citation

  • LU Chengjun & ZHOU Duanming, 2009. "Industrial energy substitution and a revised Allen elasticity in China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 4(1), pages 110-124, March.
    • Handle: RePEc:fec:journl:v:4:y:2009:i:1:p:110-124
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-009-0007-2
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    Citations

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    Cited by:

    1. Garth Heutel & David L. Kelly, 2013. "Incidence and Environmental Effects of Distortionary Subsidies," NBER Working Papers 18924, National Bureau of Economic Research, Inc.
    2. Garth Heutel & David L. Kelly, 2016. "Incidence, Environmental, and Welfare Effects of Distortionary Subsidies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(2), pages 361-415.

    More about this item

    Keywords

    energy substitution; cross price elasticity; energy strategy;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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