Plants, Vintage Capital and Energy Use

Luis Puch and Antonia Díaz

No 411, 2007 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies the aggregate effects of rising prices of energy. We do this in two different macroeconomic models of energy use at the plant level. In the first one, capital cannot be reallocated from plants that use more energy intensive technologies to plants that use more energy saving technologies. In the second model, capital can be freely reallocated across plants but subject to adjustment costs. First, we illustrate the connections between the alternative assumptions on the technology. Then we show how to reinterpret the results obtained with these plant models in terms of vintage capital, and thus, obsolescence. Finally, we evaluate the response of the two models, calibrated to US and EU data, to alternative scenarios for energy price shocks in the years to come.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed007:411

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