Can Capital-Energy Substitution Foster Economic Growth?

Itziar Lazkano and Linh Pham

Land Economics, 2016, vol. 92, issue 3, 491-514

Abstract: We study the ease of substitution between energy and other production inputs over time. We first develop a growth model with energy where our general production function allows for a nonconstant elasticity of substitution. Theoretical results show that the ease of substitution between capital and energy increases over time with the energy-capital ratio. Next, using country-level data from 108 countries between 1971 and 2011, we provide empirical evidence for a nonconstant elasticity of substitution between capital and energy. Our results imply that policies that increase the speed of the capital-energy substitution can foster long-run economic growth.

JEL-codes: O11 Q43 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.3368/le.92.3.491
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Citations: View citations in EconPapers (5)

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