Capital-energy substitution and shifts in factor demand: A meta -analysis

• Published in: Energy economics Vol. 30; no. 5; pp. 2236 - 2251
• Main Authors: Koetse, Mark J., de Groot, Henri L.F., Florax, Raymond J.G.M.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.09.2008; Elsevier Science; Elsevier; Elsevier Science Ltd
• Series: Energy Economics
• Subjects: Applied sciences; Capital; Capital-energy substitution; Cross-price elasticity; Demand; Economic data; Economic models; Elasticity of demand; Energy; Energy economics; Exact sciences and technology; Factor demand; General, economic and professional studies; Meta-analysis; Methodology. Modelling; Morishima elasticity; Price elasticity; Production function; Regression analysis; Studies; Capital-energy substitution; Cross-price elasticity; Factor demand; C10; D33; D24; E23; Production function; Morishima elasticity; Q40; O33; Meta-analysis; Substitution elasticity; C10; D24; D33; E23; 033; Q40; Energy; Methodology; Substitution; Energy economy; Cost function; Capital; Ratio of economic flexibility; Production function; Capital-energy substitution; Cross-price elasticity; Morishima elasticity; Factor demand; Meta-analysis; Metaanalysis
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2007.06.006

This paper presents a meta-analysis of capital-energy substitution elasticities. We distinguish between Morishima elasticities, which measure technological substitution potential, and cross-price elasticities, which measure actual percentage changes in capital demand in response to energy price changes. We estimate a meta-regression model with separate coefficients for the two elasticity samples. The results show that the heterogeneity in both the cross-price and Morishima elasticity samples can to a large extent be explained by study differences in, among others, model specification, data characteristics, region and time period. Controlling for potential sources of misspecification and aggregation bias we subsequently calculate short - and long -run elasticities for different regions and time periods. The resulting elasticities show that technological substitution potential is large, especially in the long run for North America. Despite substantial differences across regions and time periods, the estimated cross-price elasticities suggest capital-energy substitutability without exception.