 Capital–energy substitution: Evidence from a panel of Irish manufacturing firmsStefanie Haller and Marie Hyland () Energy Economics, 2014, vol. 45, issue C, 501-510 Abstract: We use a translog cost function to model production in the Irish manufacturing sector over the period from 1991 to 2009. We estimate both own- and cross-price elasticities and Morishima elasticities of substitution between capital, labour, materials and energy. We find that capital and energy are substitutes in the production process. Across all firms we find that a 1% rise in the price of energy is associated with an increase of 0.04% in the demand for capital. The Morishima elasticities, which reflect the technological substitution potential, indicate that a 1% increase in the price of energy causes the capital/energy input ratio to increase by 1.5%. The demand for capital in energy-intensive firms is more responsive to increases in energy prices, while it is less responsive in foreign-owned firms. We also observe a sharp decline in firms' responsiveness in the first half of the sample period. Keywords: Factor demand; Substitution between energy and capital; Firm-level panel data (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:45:y:2014:i:c:p:501-510 DOI: 10.1016/j.eneco.2014.08.003 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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