Capital-Energy Substitution Revisted: New Evidence From Micro Data
April 1997
Working Paper Number:
CES-97-04
Abstract
We use new micro data for 11,520 plants taken from the Census Bureau=s 1991 Manufacturing Energy Consumption Survey (MECS) and 1991 Annual Survey of Manufactures (ASM) to estimate elasticities of substitution between energy and capital. We found that energy and capital are substitutes. We also found that estimates of Allen elasticities of substitution -- which have been used as a standard measure of substitution -- are sensitive to varying data sets and levels of aggregation. In contrast, estimates of Morishima elasticities of substitution -- which are theoretically superior to the Allen elasticities -- are more robust (except when two-digit level data are used). The results support the views that (i) the Morishima elasticity is a better measure of factor substitution and (ii) micro data provide more accurate elasticity estimates than those obtained from aggregate data. Our findings appear to resolve the long-standing conflict among the estimates reported in the many previous studies regarding energy-capital substitution/complementarity.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
demand,
estimation,
quantity,
economist,
utilization,
econometric,
macroeconomic,
estimating,
aggregate,
substitute,
expenditure,
consumption,
elasticity,
energy,
asset
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Annual Survey of Manufactures,
Standard Industrial Classification,
Cobb-Douglas,
Manufacturing Energy Consumption Survey,
Auxiliary Establishment Survey
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Capital-Energy Substitution Revisted: New Evidence From Micro Data' are listed below in order of similarity.
-
Working PaperFactor Substitution In U.S. Manufacturing: Does Plant Size Matter🔥
April 1998
Working Paper Number:
CES-98-06
We use micro data for 10,412 U.S. manufacturing plants to estimate the degrees of factor substitution by industry and by plant size. We find that (1) capital, labor, energy and materials are substitutes in production, and (2) the degrees of substitution among inputs are quite similar across plant sizes in a majority of industries. Two important implications of these findings are that (1) small plants are typically as flexible as large plants in factor substitution; consequently, economic policies such energy conservation policies that result in rising energy prices would not cause negative effects on either large or small U.S. manufacturing plants; and (2) since energy and capital are found to be substitutes; the 1973 energy crisis is unlikely to be a significant factor contributing to the post 1973 productivity slowdown. of SubstitutionView Full Paper PDF
-
Working PaperReturns to Scale in Small and Large U.S. Manufacturing Establishments
September 1990
Working Paper Number:
CES-90-11
The objective of this study is to assess the possibility of differences in the production technologies between large and small establishments in five selected 4-digit SIC manufacturing industries. We particularly focus on estimating returns to scale and then make interferences regarding the efficiency of small businesses relative to large businesses. Using cross-section data for two census years, 1977 and 1982, we estimate a transcendental logarithmic (translog) production model that provides direct estimates of economies of scale parameters for both small and large establishments. Our primary findings are: (i) there are significant differences in the production technologies between small and large establishments; and (ii) based on the scale parameter estimates, small establishments appear to be as efficient as large establishments under normal economic conditions, suggesting that large size is not a necessary condition for efficient production. However, small establishments seem to be unable to maintain constant returns to scale production during economic recession such as that in 1982.View Full Paper PDF
-
Working PaperA Flexible Test for Agglomeration Economies in Two U.S. Manufacturing Industries
August 2004
Working Paper Number:
CES-04-14
This paper uses the inverse input demand function framework of Kim (1992) to test for economies of industry and urban size in two U.S. manufacturing sectors of differing technology intensity: farm and garden machinery (SIC 352) and measuring and controlling devices (SIC 382). The inverse input demand framework permits the estimation of the production function jointly with a set of cost shares without the imposition of prior economic restrictions. Tests using plant-level data suggest the presence of population scale (urbanization) economies in the moderate- to low-technology farm and garden machinery sector and industry scale (localization) economies in the higher technology measuring and controlling devices sector. The efficiency and generality of the inverse input demand approach are particularly appropriate for micro-level studies of agglomeration economies where prior assumptions regarding homogeneity and homotheticity are less appropriate.View Full Paper PDF
-
Working PaperMeasuring Total Factor Productivity, Technical Change And The Rate Of Returns To Research And Development
May 1991
Working Paper Number:
CES-91-03
Recent research indicates that estimates of the effect of research and development (R&D) on total factor productivity growth are sensitive to different measures of total factor productivity. In this paper, we use establishment level data for the flat glass industry extracted from the Census Bureau's Longitudinal Research Database (LRD) to construct three competing measures of total factor productivity. We then use these measures to estimate the conventional R&D intensity model. Our empirical results support previous finding that the estimated coefficients of the model are sensitive to the measurement of total factor productivity. Also, when using microdata and more detailed modeling, R&D is found to be a significant factor influencing productivity growth. Finally, for the flat glass industry, a specific technical change index capturing the learning-by-doing process appears to be superior to the conventional time trend index.View Full Paper PDF
-
Working PaperThe Structure Of Production Technology Productivity And Aggregation Effects
August 1991
Working Paper Number:
CES-91-05
This is a sequel to an earlier paper by the author, Dhrymes (1990). Using the LRD sample, that paper examined the adequacy of the functional form specifications commonly employed in the literature of US Manufacturing production relations. The "universe" of the investigation was the three digit product group; the basic unit of observation was the plant; the sample consisted of all "large" plants, defined by the criterion that they employ 250 or more workers. The study encompassed three digit product groups in industries 35, 36 and 38, over the period 1972-1986, and reached one major conclusion: if one were to judge the adequacy of a given specification by the parametric compatibility of the estimates of the same parameters, as derived from the various implications of each specification, then the three most popular (production function) specifications, Cobb-Douglas, CES and Translog all fell very wide of the mark. The current paper focuses the investigation on two digit industries (but retains the plant as the basic unit of observation), i.e., our sample consists of all "large" manufacturing plants, in each of Industry 35, 36 and 38, over the period 1972-1986. It first replicates the approach of the earlier paper; the results are basically of the same genre, and for that reason are not reported herein. Second, it examines the extent to which increasing returns to scale characterize production at the two digit level; it is established that returns to scale at the mean, in the case of the translog production function are almost identical to those obtained with the Cobb-Douglas function.1 Finally, it examines the robustness and characteristics of measures of productivity, obtained in the context of an econometric formulation and those obtained by the method of what may be thought of as the "Solow Residual" and generally designated as Total Factor Productivity (TFP). The major finding here is that while there are some differences in productivity behavior as established by these two procedures, by far more important is the aggregation sensitivity of productivity measures. Thus, in the context of a pooled sample, introduction of time effects (generally thought to refer to productivity shifts) are of very marginal consequence. On the other hand, the introduction of four digit industry effects is of appreciable consequence, and this phenomenon is universal, i.e., it is present in industry 35, 36 as well as 38. The suggestion that aggregate productivity behavior may be largely, or partly, an aggregation phenomenon is certainly not a part of the established literature. Another persistent phenomenon uncovered is the extent to which productivity measures for individual plants are volatile, while two digit aggregate measures appear to be stable. These findings clearly calls for further investigation.View Full Paper PDF
-
Working PaperComputer Investment, Computer Networks and Productivity
January 2005
Working Paper Number:
CES-05-01
Researchers in a large empirical literature find significant relationships between computers and labor productivity, but the estimated size of that relationship varies considerably. In this paper, we estimate the relationships among computers, computer networks, and plant-level productivity in U.S. manufacturing. Using new data on computer investment, we develop a sample with the best proxies for computer and total capital that the data allow us to construct. We find that computer networks and computer inputs have separate, positive, and significant relationships with U.S. manufacturing plant-level productivity. Keywords: computer input; information technology; labor productivityView Full Paper PDF
-
Working PaperModelling Technical Progress And Total Factor Productivity: A Plant Level Example
October 1988
Working Paper Number:
CES-88-04
Shifts in the production frontier occur because of changes in technology. A model of how a firm learns to use the new technology, or how it adapts from the first production frontier to the second, is suggested. Two different adaptation paths are embodied in a translog cost function and its attendant cost share equations. The paths are the traditional linear time trend and a learning curve. The model is estimated using establishment level data from a non-regulated industry that underwent a technological shift in the time period covered by the data. The learning curve resulted in more plausible estimates of technical progress and total factor productivity growth patterns. A significant finding is that, at the establishment level, all inputs appear to be substitutes.View Full Paper PDF
-
Working PaperMicro Data and the Macro Elasticity of Substitution
March 2012
Working Paper Number:
CES-12-05
We estimate the aggregate elasticity of substitution between capital and labor in the US manufacturing sector. We show that the aggregate elasticity of substitution can be expressed as a simple function of plant level structural parameters and sufficient statistics of the distribution of plant input cost shares. We then use plant level data from the Census of Manufactures to construct a local elasticity of substitution at various levels of aggregation. Our approach does not assume the existence of a stable aggregate production function, as we build up our estimate from the cross section of plants at a point in time. Accounting for substitution within and across plants, we find that the aggregate elasticity is substantially below unity at approximately 0.7. Lastly we assess the sources of the bias of aggregate technical change from 1987 to 1997. We find that the labor augmenting character of aggregate technical change is due almost exclusively to labor augmenting productivity growth at the plant level rather than relative growth in capital intensive plants.View Full Paper PDF
-
Working PaperEstimating the Hidden Costs of Environmental Regulation
May 2002
Working Paper Number:
CES-02-10
This paper examines whether accounting systems identify all the costs of environmental regulation. We estimate the relation between the 'visible' cost of regulatory compliance, i.e., costs that are correctly classified in firms' accounting systems, and 'hidden' costs i.e., costs that are embedded in other accounts. We use plant-level data from 55 steel mills to estimate hidden costs, and we follow up with structured interviews of corporate-level managers and plant-level accountants. Empirical results show that a $1 increase in the visible cost of environmental regulation is associated with an increase in total cost (at the margin) of $10-11, of which $9-10 are hidden in other accounts. The findings suggest that inappropriate identification and accumulation of the costs of environmental compliance are likely to lead to distorted costs in firms subject to environmental regulation.View Full Paper PDF
-
Working PaperEnergy Prices, Pass-Through, and Incidence in U.S. Manufacturing*
January 2016
Working Paper Number:
CES-16-27
This paper studies how increases in energy input costs for production are split between consumers and producers via changes in product prices (i.e., pass-through). We show that in markets characterized by imperfect competition, marginal cost pass-through, a demand elasticity, and a price-cost markup are suffcient to characterize the relative change in welfare between producers and consumers due to a change in input costs. We and that increases in energy prices lead to higher plant-level marginal costs and output prices but lower markups. This suggests that marginal cost pass-through is incomplete, with estimates centered around 0.7. Our confidence intervals reject both zero pass-through and complete pass-through. We and heterogeneous incidence of changes in input prices across industries, with consumers bearing a smaller share of the burden than standards methods suggest.View Full Paper PDF
