Substitution and price elasticity estimates using inter-country pooled data in a translog cost model

• Published in: Energy economics Vol. 28; no. 5; pp. 706 - 719
• Main Authors: Roy, Joyashree, Sanstad, Alan H., Sathaye, Jayant A., Khaddaria, Raman
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier B.V 01.11.2006; Elsevier; Elsevier Science Ltd
• Series: Energy Economics
• Subjects: Brazil; Costs; Developing countries; Elasticity; Energy economics; Estimates; Fuel and input; Fuels; India; Industry; Integrated Assessment Model; LDCs; Price elasticity; Prices; South Korea; Studies; Translog; U.S.A; United States > US; Integrated Assessment Model; Industry; South Korea; Elasticity; Brazil; Fuel and input; US; Translog; India
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2006.05.008

Pooled data across several developing countries and the U. S. were used to estimate long-run substitution and price elasticities in a translog framework for the paper, iron and steel, and aggregate manufacturing industries. While the quality of the estimates varies across the several industry-specific models, the results suggest higher values for these elasticities than appear commonly used in integrated assessment models. Estimates of own-price elasticities of energy range from − 0.80 to − 1.76 and are comparable to estimates from previous econometric studies in the context of developed countries (− 0.77 to − 0.87). Substitution elasticities show wider variation across countries and industries. For energy and capital they range from − 1.96 to 9.80, for labor and energy from 2.61 to 7.11, and for energy and material from − 0.26 to 2.07.