Allen partial elasticity of substitution between energy-capital and energy-labor in the US manufacturing, 1954 to 1977

Thesis/Dissertation · Fri Jan 01 04:00:00 EST 1982

OSTI ID:6014925

Moghimzadeh, M

All recent studies confirm that energy and labor are substitutes, but there exist different ideas about the relationship between capital and energy. Some studies, using time-series analysis, have shown that capital and energy are complements, and some studies using cross sections indicate that capital and energy are substitutes. This research tries to show that the different results could in part be traceable to the fact that two different types of energy, electric energy and non electric energy, are involved, and that these two forms of energy behave in quite different ways with regard to their relationship to labor and capital. This study utilizes the translog cost function with five inputs: labor, capital, non electric energy, electric energy and material. The purpose of using the translog cost function is to derive estimating equations of cost shares for each of the five factors. Several important conclusions emerge from the results: (1) non electric energy and electric energy demands are responsive to changes in their own price; (2) comparison of the non-electric energy-capital substitution elasticities with those obtained from cross section studies reveal that the estimates of the Allen elasticities of substitution are in substantial agreement. Thus, non-electric energy and capital display a substantial amount of substitution; (3) comparison of electric energy-capital substitution with those of time series analysis shows that both are in agreement. It is concluded that electric energy and capital are complements; (4) it is determined that non-electric energy and labor are complements and that electric energy and labor are substitutes; and (5) finally, as expected, and found in numerous traditional two input (capital-labor) studies, capital and labor are quite substitutable.

• OSTI ID: 6014925
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
CAPITAL
ENERGY
INDUSTRY
LABOR
MANUFACTURING