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Energy Input Interaction in US Production

Author

Listed:
  • Cassandra Copeland

    (Oglethorpe University)

  • Henry Thompson

    (Auburn University)

Abstract

This paper estimates production functions for annual US output from 1949 to 2013 adding energy Btu input to fixed capital assets and the labor force. Interactions between inputs are parsimoniously introduced in the error correction estimates. Fixed capital assets successfully imbed technology. Energy and capital are weak substitutes or complements due to their positive interaction. Energy is substantially underpaid relative to its increasing productivity while labor is increasingly overpaid relative to its declining productivity. Factor price elasticities involving labor and the wage are noticeably strong. The nearly elastic own wage effect explains the challenges facing labor.

Suggested Citation

  • Cassandra Copeland & Henry Thompson, 2022. "Energy Input Interaction in US Production," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 14(4), pages 525-541, December.
    • Handle: RePEc:ren:journl:v:14:y:2022:i:4:p:525-541
    DOI: https://doi.org/10.15353/rea.v14i4.3631
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    More about this item

    Keywords

    energy interaction; factor productivity; factor price elasticity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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