Energy Prices, Growth,and the Channels in Between: Theory and Evidence

Lucas Bretschger

No 06/47, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: The paper first develops a theoretical model with different sectors, each providing a channel for an impact of energy prices on growth. In the short run, growth is hampered by increasing energy prices. In the long run, however, capital accumulation may be crowded out by energy use. This happens in the sectors with poor substitution possibilities between primary inputs where growth increases with rising energy prices. In the empirical part, estimations using di¤erent channels and energy sources with five-year average panel data for a sample of 44 developed countries in the period 1975-1999 are presented. It is shown that, for a large variety of constellations, rising energy prices are not a threat to economic development, they can even be positive for growth.

Keywords: Energy Prices and Growth; Endogenous Capital Accumulation; Structural Change; Panel Data (search for similar items in EconPapers)
JEL-codes: Q43 Q56 O41 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene
Date: 2006-01
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Persistent link: http://EconPapers.repec.org/RePEc:eth:wpswif:06-47

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