IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Estimation of substitution elasticities for CGE models

  • Azusa OKAGAWA

    ()

    (Graduate School of Economics, Osaka University)

  • Kanemi BAN

    ()

    (Graduate School of Economics, Osaka University)

Registered author(s):

    Many studies of climate policy are based on computable general equilibrium (CGE) modeling. The simulation results and conclusions reached by these models depend on the size of the parameters specified. In particular, the substitution elasticities between production factors have a major influence. Therefore, in order to obtain reliable simulation results we should employ empirical evidence gathered on the substitution elasticities. Unfortunately, in many instances, the lack of econometric analysis means we must specify these key parameters based on existing work or borrow them from prominent modeling exercises. In this study, we estimate nested constant elasticity of substitution (CES) production functions using panel data for OECD countries to help improve the reliability of CGE models for climate policy. Our results show higher values for substitution elasticities closely related to energy inputs for energy-intensive industries and lower values for other industries compared to the conventional values often used in existing models. With the new parameters estimated, we find that conventional parameters could overestimate the necessary carbon price by 44%, and obtain evidence of different distributions of CO2 emission reduction costs across industries.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0816.pdf
    Download Restriction: no

    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-16.

    as
    in new window

    Length: 19 pages
    Date of creation: Apr 2008
    Date of revision:
    Handle: RePEc:osk:wpaper:0816
    Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/
    Email:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:0816. 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: (Atsuko SUZUKI)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.