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

Lucas Bretschger

No 34, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: The paper develops a theoretical model with different channels through which energy affects economic growth. The conditions for a crowding out of capital accumulation by intensive energy use are derived. In the empirical part, estimations using a system with five simultaneous equations for a sample of 37 developed countries with five-year average panel data over the period 1975-2004 are presented. It is shown that in the long run rising energy prices are not a threat to development. On the contrary, we find conditions under which decreasing energy input induces investments in physical and knowledge capital. A ten percent increase in energy prices is found to raise the growth rate by 0.4 percentage points.

Keywords: Energy Prices and Growth; Endogenous Capital Accumulation; Structural Change; Panel Data (search for similar items in EconPapers)
JEL-codes: O41 O47 Q43 Q56 (search for similar items in EconPapers)
Date: 2010-02-24
New Economics Papers: this item is included in nep-ene and nep-fdg
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Related works:
Journal Article: Energy prices, growth, and the channels in between: Theory and evidence (2015)
Working Paper: Energy Prices, Growth,and the Channels in Between: Theory and Evidence (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:034

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