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Energy-Saving Technical Change

Author

Listed:
  • John Hassler

    () (Institute for International Economic Studies (IIES)
    CEPR)

  • Per Krusell

    () (Institute for International Economic Studies (IIES)
    CEPR
    NBER
    CAERP)

  • Conny Olovsson

    (Institute for International Economic Studies (IIES))

Abstract

We estimate an aggregate production function with constant elasticity of substitution between energy and a capital/labor composite using U.S. data. The implied measure of energy-saving technical change appears to respond strongly to the oil-price shocks in the 1970s and has a negative medium-run correlation with capital/labor-saving technical change. Our findings are suggestive of a model of directed technical change, with low short-run substitutability between energy and capital/labor but significant substitutability over longer periods through technical change. We construct such a model, calibrate it based on the historical data, and use it to discuss possibilities for the future.

Suggested Citation

  • John Hassler & Per Krusell & Conny Olovsson, 2015. "Energy-Saving Technical Change," Discussion Papers 1529, Centre for Macroeconomics (CFM).
  • Handle: RePEc:cfm:wpaper:1529
    as

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    File URL: http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2015/CFMDP2015-29-Paper.pdf
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    References listed on IDEAS

    as
    1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    2. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
    3. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 29-45.
    4. Robert B. Barsky & Lutz Kilian, 2004. "Oil and the Macroeconomy Since the 1970s," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 115-134, Fall.
    5. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
    6. Joseph Stiglitz, 1974. "Growth with Exhaustible Natural Resources: Efficient and Optimal Growth Paths," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 123-137.
    7. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 3-28.
    8. Lutz Kilian, 2008. "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 871-909, December.
    9. Griffin, James M & Gregory, Paul R, 1976. "An Intercountry Translog Model of Energy Substitution Responses," American Economic Review, American Economic Association, vol. 66(5), pages 845-857, December.
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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