Oil shocks, demand for oil, and productivity slowdown: an analysis with the putty-semiputty hypothesis (PSH)

Thesis/Dissertation · Thu Jan 01 04:00:00 EST 1987

OSTI ID:6433618

Kim, T D

Recurring unexpected changes in oil prices have undoubtedly played a major role in the business cycles of the 1970s and the 1980s. This study concentrates on the supply-side channel in explaining the consequences of the petroleum price movement. Nonlinear specifications of oil demand and labor productivity are derived from the PSH. For each vintage used in the production, the oil-labor ratio turns out to be a weighted average of those obtained from putty-clay and putty-putty technologies. The same result holds for the vintage labor productivity. This general nature of PSH enables a dynamic aggregate model, that can describe both the short-run and long-run effects at the same time, to be constructed. Among seven OECD countries (U.S.A., Japan, Canada, France, West Germany, Italy, and U.K.) included in the sample of pooled regressions, Japan has a higher ex-post elasticity of substitution than others. The oil-price effect on the recent slowdown of labor productivity is estimated with a small macro model, which includes equations for price and wage inflations. Dynamic simulation results show that the productivity growth may have been decelerated by about 2% a year due to oil shocks in the 1970s.

• Research Organization: Yale Univ., New Haven, CT (USA)
• OSTI ID: 6433618
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
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294002 -- Energy Planning & Policy-- Petroleum
ECONOMIC IMPACT
ENERGY EXPENSES
ENERGY SHORTAGES
ENERGY SOURCES
FOSSIL FUELS
FUELS
INDUSTRY
PETROLEUM
PETROLEUM INDUSTRY
PRICES
PRODUCTIVITY
SHORTAGES