A Theory of Energy Use

Luis Puch and Antonia Díaz
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Antonia Díaz: University Carlos III
Authors registered in the RePEc Author Service: Antonia Díaz

No 802, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: The evidence shows that the short run elasticity of energy use is smaller than its long run elasticity. The recent evidence on energy use and energy prices suggests, though, that the short run response of energy use to energy prices has changed over time. Existing theories of energy use, namely, complementarity between capital and energy at the aggregate level, or putty-clay models of energy use, cannot account for this change in the short run elasticity of energy use. Here we propose a theory where, as in the data, the short run elasticity of energy use is smaller than the long run elasticity but it also may change depending on the rate of embodied technological progress, accounting for its increase in the recent years.

Date: 2012
New Economics Papers: this item is included in nep-ene
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