Industrial energy substitution and a revised Allen elasticity in China

Chengjun Lu () and Duanming Zhou
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Chengjun Lu: Department of National Economic Management, School of Economics, Renmin University of China, Beijing 100872, China
Duanming Zhou: Department of National Economic Management, School of Economics, Renmin University of China, Beijing 100872, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2009, vol. 4, issue 1, 110-124

Abstract: To overcome the drawbacks in estimating the rate of input substitution in existing econometric models, our paper is first to estimate the absolute/net rate of input substitution of capital and labor for energy in China¡¯s industrial sector. Based on trans-log cost function with constant elasticity of substitution and combined MES method with technology progress and output effect, our paper finds a significant substitution relationship between labor and energy and an uncertain substitution relationship between capital and energy with some complementary characteristics. Furthermore, technology progress and output effect are found to have enhanced the substitution of labor for energy in the past 30 years. Based on these empirical findings, constructive suggestions are made concerning the medium and long-term development strategy of energy in China¡¯s industrial sector.

Keywords: energy substitution; cross price elasticity; energy strategy (search for similar items in EconPapers)
JEL-codes: Q41 Q42 Q43 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:4:y:2009:i:1:p:110-124

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