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

  • Yazid Dissou

    ()

    (Department of Economics, University of Ottawa)

  • Reza Ghazal

    ()

    (Department of Economics, University of Ottawa)

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.

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Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 0809E.

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Length: 29 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:ott:wpaper:0809e
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