IDEAS home Printed from
   My bibliography  Save this paper

Directed Energy-Saving Technical Change


  • Per Krusell

    (Institute for International Economic Studies, Stockholm University.)

  • Conny Olovsson

    (Institute for International Economic Studies, Stockholm University.)

  • John Hassler

    (Institute for International Economic Studies, Stockholm University.)


Recent research has been able to measure two forms of technical change---one (fossil) energy-saving and one saving on capital/labor. The results first show strong evidence for "directed technical change" in the sense that the total resources devoted to saving on the inputs responds endogenously to incentives and that that the two aggregate technology series display a negative medium-run correlation. Second, the elasticity of substitution between these inputs is close to zero (in contrast to the standard assumption of 1). Against this background we set up a simple and almost-tractable model of directed technical change where a final good is produced with capital and finite fossil energy. Specifically, the model features log utility, Leontief production, full depreciation and zero-cost fossil-fuel extraction. We calibrate the model and show that it can simultaneously capture important features of the U.S. post-war period. First, if the capital-augmenting technology starts below its steady state value, the model features peak oil and a relatively fast growth in the capital-augmenting technology and a low growth rate of the energy-saving technology as in the U.S. up to the first oil-price shock. Second, monopoly power (modeled as a reduction in the natural resource) causes an increase in the rate of energy-saving technical change and slow growth in the technology that saves on capital (i.e., a productivity slowdown) as in the period after the first oil shock.

Suggested Citation

  • Per Krusell & Conny Olovsson & John Hassler, 2011. "Directed Energy-Saving Technical Change," 2011 Meeting Papers 1055, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:1055

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. David Comerford, 2013. "A balance of questions: what can we ask of climate change economics?," ESE Discussion Papers 216, Edinburgh School of Economics, University of Edinburgh.
    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.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed011:1055. 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: (Christian Zimmermann). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.