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Energy Substitutability in Canadian Manufacturing: Econometric Estimation with Bootstrap Confidence Intervals

Author

Listed:
  • Yazid Dissou

    (Department of Economics, University of Ottawa)

  • Reza Ghazal

    (Department of Economics, University of Ottawa)

Abstract

This study provides estimates of the price and Morishima substitution elasticities between energy and non-energy inputs in two Canadian energy-intensive manufacturing industries: Primary Metal and Cement. The elasticities are estimated using annual industry-level KLEM data (1961- 2003) and relying on two flexible functional forms: the Translog and the Symmetric Generalized McFadden (SGM) cost functions. In addition to the point estimates, the confidence intervals of the elasticities are computed using single- and double-bootstrap resampling techniques. For both industries, the estimation results suggest that capital, labour, material and energy are pairwise substitutes and that energy is the most substitutable input. However, the low magnitudes of the estimated elasticities do not seem to offer great flexibility to these industries to adapt to high increases in energy prices.

Suggested Citation

  • Yazid Dissou & Reza Ghazal, 2008. "Energy Substitutability in Canadian Manufacturing: Econometric Estimation with Bootstrap Confidence Intervals," Working Papers 0809E, University of Ottawa, Department of Economics.
    • Handle: RePEc:ott:wpaper:0809e
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    Cited by:

    1. Thompson, Alexi, 2013. "An almost ideal supply system estimate of US energy substitution," Energy Economics, Elsevier, vol. 40(C), pages 813-818.

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    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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