Working Paper: NBER ID: w18456
Authors: John Hassler; Per Krusell; Conny Olovsson
Abstract: We estimate an aggregate production function with constant elasticity of substitution between energy and a capital/labor composite using U.S. data. The implied measure of energy-saving technical change appears to respond strongly to the oil-price shocks in the 1970s and has a negative medium-run correlation with capital/labor-saving technical change. Our findings are suggestive of a model of directed technical change, with low short-run substitutability between energy and capital/labor but significant substitutability over longer periods through technical change. We construct such a model, calibrate it based on the historical data, and use it to discuss possibilities for the future.
Keywords: Energy-saving; Technical change; Oil price shocks; Directed technical change; Capital-labor composite
JEL Codes: E00; O30; Q32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| oil price shocks (Q43) | energy-saving technical change (O33) |
| energy-saving technical change (O33) | capital-labor saving technical change (D24) |
| capital-labor saving technical change (D24) | energy-saving technical change (O33) |
| R&D efforts (O32) | energy-saving technical change (O33) |