Costly capital reallocation and energy use
In thime series data, energy use does not change much with energy price changes. However, energy use is responsive to international differences in energy prices in cross-section data across countries. In this paper we consider a model of energy use in which production takes place at individual plants and capital can be used either to directly produce output or to reduce toe energy required to run the plant. We assume that reallocating capital from one use to another is costly. This turns out to be crucial for the quantitative properties of the model to be in conformity with the low short-run and high long-run elasticities of energy use seen in data. Furthermore, our model displays variations in capacity utilization that are in line with those observed during the period of major oil price increases.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sakellaris, Plutarchos, 1997. "Irreversible Capital and the Stock Market Response to Shocks in Profitability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 351-379, May.
- Lawrence H. Goulder, 1993. "Energy Taxes: Traditional Efficiency Effects and Environmental Implications," NBER Working Papers 4582, National Bureau of Economic Research, Inc.
- 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.
- In-Moo Kim & Prakash Loungani, 1991.
"The role of energy in real business cycle models,"
Working Paper Series, Macroeconomic Issues
91-6, Federal Reserve Bank of Chicago.
- Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 169-179, May.
- Pindyck, Robert S & Rotemberg, Julio J, 1983. "Dynamic Factor Demands and the Effects of Energy Price Shocks," American Economic Review, American Economic Association, vol. 73(5), pages 1066-1079, December.
- Gary Hansen, 2010.
"Indivisible Labor and the Business Cycle,"
Levine's Working Paper Archive
233, David K. Levine.
- Rogerson, Richard, 1988.
"Indivisible labor, lotteries and equilibrium,"
Journal of Monetary Economics,
Elsevier, vol. 21(1), pages 3-16, January.
- Thomas F. Cooley & Gary D. Hansen & Edward C. Prescott, 1994.
"Equilibrium business cycles with idle resources and variable capacity utilization,"
94-22, Federal Reserve Bank of Philadelphia.
- Cooley, Thomas F & Hansen, Gary D & Prescott, Edward C, 1995. "Equilibrium Business Cycles with Idle Resources and Variable Capacity Utilization," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(1), pages 35-49, June.
- King, R.G. & Rebelo, S.T., 1989.
"Transitional Dynamics And Economic Growth In The Neoclassical Model,"
RCER Working Papers
206, University of Rochester - Center for Economic Research (RCER).
- King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
- Robert G. King & Sergio T. Rebelo, 1989. "Transitional Dynamics and Economic Growth in the Neoclassical Model," NBER Working Papers 3185, National Bureau of Economic Research, Inc.
- Juillard, Michel, 1996. "Dynare : a program for the resolution and simulation of dynamic models with forward variables through the use of a relaxation algorithm," CEPREMAP Working Papers (Couverture Orange) 9602, CEPREMAP.
- Mark E Doms, 1993. "Energy Intensity, Electricity Consumption, and Advanced Manufacturing Technology Usage," Working Papers 93-9, Center for Economic Studies, U.S. Census Bureau.
- Jorgenson, Dale W. & Wilcoxen, Peter J., 1993. "Reducing US carbon emissions: an econometric general equilibrium assessment," Resource and Energy Economics, Elsevier, vol. 15(1), pages 7-25, March.
- Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
- Davis, Steven J. & Haltiwanger, John, 2001.
"Sectoral job creation and destruction responses to oil price changes,"
Journal of Monetary Economics,
Elsevier, vol. 48(3), pages 465-512, December.
- Steven J. Davis & John Haltiwanger, 1999. "Sectoral Job Creation and Destruction Responses to Oil Price Changes," NBER Working Papers 7095, National Bureau of Economic Research, Inc.
- Patrick J. Kehoe & Andrew Atkeson, 1999.
"Models of Energy Use: Putty-Putty versus Putty-Clay,"
American Economic Review,
American Economic Association, vol. 89(4), pages 1028-1043, September.
- Andrew Atkeson & Patrick J. Kehoe, 1994. "Models of Energy Use: Putty-Putty versus Putty-Clay," NBER Working Papers 4833, National Bureau of Economic Research, Inc.
- Finn, Mary G., 1995. "Variance properties of Solow's productivity residual and their cyclical implications," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1249-1281.
- Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1999.
"The Induced Innovation Hypothesis and Energy-Saving Technological Change,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 114(3), pages 941-975.
- Stavins, Robert & Jaffe, Adam & Newell, Richard, 1998. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," Discussion Papers dp-98-12-rev, Resources For the Future.
- Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1998. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," NBER Working Papers 6437, National Bureau of Economic Research, Inc.
- Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-268, August.
- Bresnahan, Timothy F & Ramey, Valerie A, 1993. "Segment Shifts and Capacity Utilization in the U.S. Automobile Industry," American Economic Review, American Economic Association, vol. 83(2), pages 213-218, May.
- Rotemberg, Julio J & Woodford, Michael, 1996.
"Imperfect Competition and the Effects of Energy Price Increases on Economic Activity,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 28(4), pages 550-577, November.
- Julio J. Rotemberg & Michael Woodford, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," NBER Working Papers 5634, National Bureau of Economic Research, Inc.
- Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 593-617, June.
When requesting a correction, please mention this item's handle: RePEc:cte:werepe:we015215. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Poveda)
If references are entirely missing, you can add them using this form.