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Capital-Energy Substitution Revisted: New Evidence From Micro Data

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  • Sang V Nguyen
  • Mary L Streitwieser

Abstract

We use new micro data for 11,520 plants taken from the Census Bureau=s 1991 Manufacturing Energy Consumption Survey (MECS) and 1991 Annual Survey of Manufactures (ASM) to estimate elasticities of substitution between energy and capital. We found that energy and capital are substitutes. We also found that estimates of Allen elasticities of substitution -- which have been used as a standard measure of substitution -- are sensitive to varying data sets and levels of aggregation. In contrast, estimates of Morishima elasticities of substitution -- which are theoretically superior to the Allen elasticities -- are more robust (except when two-digit level data are used). The results support the views that (i) the Morishima elasticity is a better measure of factor substitution and (ii) micro data provide more accurate elasticity estimates than those obtained from aggregate data. Our findings appear to resolve the long-standing conflict among the estimates reported in the many previous studies regarding energy-capital substitution/complementarity.

Suggested Citation

  • Sang V Nguyen & Mary L Streitwieser, 1997. "Capital-Energy Substitution Revisted: New Evidence From Micro Data," Working Papers 97-4, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:97-4
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    File URL: https://www2.census.gov/ces/wp/1997/CES-WP-97-04.pdf
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    Cited by:

    1. Giulia BETTIN & Alessia LO TURCO & Daniela MAGGIONI, 2011. "A firm level perspective on migration," Working Papers 360, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    2. Shankar, Bhavani & Piesse, Jenifer & Thirtle, Colin, 2003. "Energy substitutability in transition agriculture: estimates and implications for Hungary," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 29(2), October.
    3. Giulia Bettin & Alessia Lo Turco & Daniela Maggioni, 2014. "A firm level perspective on migration: the role of extra-EU workers in Italian manufacturing," Journal of Productivity Analysis, Springer, vol. 42(3), pages 305-325, December.
    4. Valeria Costantini & Francesco Crespi & Elena Paglialunga, 2018. "Capital-energy substitutability in manufacturing sectors: methodological and policy implications," Departmental Working Papers of Economics - University 'Roma Tre' 0234, Department of Economics - University Roma Tre.

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    Keywords

    CES; economic; research; micro; data; microdata; chief; economist;

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