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Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation

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  • Paul E. Brockway

    () (Sustainability Research Institute, School of Earth and Environment, University of Leeds, Leeds LS2 9JT, UK)

  • Matthew K. Heun

    () (Engineering Department, Calvin College, Grand Rapids, MI 49546, USA)

  • João Santos

    () (MARETEC—Marine, Environment, and Technology Center, Environment and Energy Scientific Area, Department of Mechanical Engineering, Instituto Superior Técnico (IST), University of Lisbon, Avenida Rovisco Pais, 1 1049-001 Lisbon, Portugal)

  • John R. Barrett

    () (Sustainability Research Institute, School of Earth and Environment, University of Leeds, Leeds LS2 9JT, UK)

Abstract

Capital–labour–energy Constant Elasticity of Substitution (CES) production functions and their estimated parameters now form a key part of energy–economy models which inform energy and emissions policy. However, the collation and guidance as to the specification and estimation choices involved with such energy-extended CES functions is disparate. This risks poorly specified and estimated CES functions, with knock-on implications for downstream energy–economic models and climate policy. In response, as a first step, this paper assembles in one place the major considerations involved in the empirical estimation of these CES functions. Discussions of the choices and their implications lead to recommendations for CES empiricists. The extensive bibliography allows those interested to dig deeper into any aspect of the CES parameter estimation process.

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  • Paul E. Brockway & Matthew K. Heun & João Santos & John R. Barrett, 2017. "Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation," Energies, MDPI, Open Access Journal, vol. 10(2), pages 1-23, February.
  • Handle: RePEc:gam:jeners:v:10:y:2017:i:2:p:202-:d:89995
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    Keywords

    CES production function; econometrics; estimation; elasticity of substitution; energy policy; energy;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • 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
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other

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