Long-run estimates of interfuel and interfactor elasticities
Chunbo Ma () and
David Stern ()
No 249521, Working Papers from Australian National University, Centre for Climate Economics & Policy
Meta-analyses of interfuel and capital-energy elasticities of substitution show that elasticity estimates are dependent on the type of data – time series, panel, or crosssection – and the estimators used. Econometric theory suggests that the between estimator might generate the best estimates of long-run elasticities but no existing estimates of elasticities of substitution have used it. Alternatively, Chirinko et al. argued in favor of estimating long-run elasticities of substitution using a long-run difference estimator. We provide estimates of China’s interfuel and interfactor elasticities of substitution using the between and long-run difference estimators. To address potential omitted variables bias, we add province level inefficiency and national technological change terms to our regression model. The results show that demand for coal and electricity in China is very inelastic, while demand for diesel and gasoline is elastic. With the exception of gasoline and diesel, there are limited substitution possibilities among the fuels. Substitution possibilities are greater between energy and labor than between energy and capital. The results are quite different to some previous studies for China but coincide well with the patterns found in meta-analyses for long-run estimates of elasticities of substitution.
Keywords: Energy; substitution; elasticity; demand; China; Demand and Price Analysis; Resource /Energy Economics and Policy; D24; Q40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-tra and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Journal Article: Long-run estimates of interfuel and interfactor elasticities (2016)
Working Paper: Long-run estimates of interfuel and interfactor elasticities (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ags:ancewp:249521
Access Statistics for this paper
More papers in Working Papers from Australian National University, Centre for Climate Economics & Policy Contact information at EDIRC.
Series data maintained by AgEcon Search ().