Siyasal: Journal of Political Sciences

SUBMITINFORMATION
EnglishTürkçe

Research Article


DOI :10.26650/siyasal.2020.29.2.0087   IUP :10.26650/siyasal.2020.29.2.0087    Full Text (PDF)

Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries

Ömer Faruk Altunç, Abdulmecit Yıldırım

Energy and other factors of production are the primary inputs in the context of sustainable economic growth. This makes energy relatively strategic in the development stage and in the energy importers economies. In this study, the effect of elasticity of substitution on economic growth is investigated for 31 OECD countries over the period from 1990-2014. Although the effect of elasticity of substitution between capital and aggregate energy consumption on economic growth has been examined in many studies, the issue of how this effect changes between the different sources of energy has not been adequately addressed. The research is aimed at contributing to the related literature in this regard. The effect of elasticity of substitution between capital and different energy sources on economic growth is examined within the neoclassical Solow-Swan Growth model. In this model, technology is defined by a variable elasticity of substitution (VES) production function. The empirical model is estimated by the non-linear least squares (NLLS) method. The results show that oil and primary energy consumption are substitutes; natural gas, coal, and hydroelectricity consumption are the complement in the final production of output.

Keywords: Production Inputs, Energy, Elasticity of Substitution, VES Production Function
JEL Classification : D24 , C13 , Q43

PDF View

References

  • Acemoglu, D. (2009). Introduction to modern economic growth. Princeton University Press. google scholar
  • Apostolakis, B. E. (1990). Energy--capital substitutability/ complementarity: The dichotomy. Energy Economics, 12(1), 48‒58. https://doi.org/10.1016/0140-9883(90)90007-3 google scholar
  • Berndt, E. R., & Wood, D. O. (1975). Technology, Prices, and the Derived Demand for Energy. The Review of Economics and Statistics, 57(3), 259‒268. google scholar
  • Blackorby, C., & Russell, R. R. (1989). Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities). American Economic Review, 79(4), 882‒888. google scholar
  • Chichilnisky, G. (1993). Energy-Capital Substitution: A General Equilibrium Analysis. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1374615 google scholar
  • Chumacero R. A. (2006). "Lecture notes on econometrics", manuscript, University of Chile. google scholar
  • Costantini, V., & Paglialunga, E. (2014). Elasticity of substitution in capital-energy relationships: how central is a sector-based panel estimation approach? (SEEDS Working Papers No. 1314). SEEDS, Sustainability Environmental Economics and Dynamics Studies. https://ideas.repec.org/p/srt/wpaper/1314.html google scholar
  • Deininger, S. M., Mohler, L., & Mueller, D. (2018). Factor substitution in Swiss manufacturing: empirical evidence using micro panel data. Swiss J Economics Statistics, 154(6). doi:10.1186/s41937-017-0016-5 google scholar
  • Feenstra, R. C., Inklaar, R., & Timmer, M. P. (2015). The Next Generation of the Penn World Table. American Economic Review, 105(10), 3150‒3182. doi: 10.1257/aer.20130954 google scholar
  • Griffin, J. M., & Gregory, P. R. (1976). An Intercountry Translog Model of Energy Substitution Responses. American Economic Review, 66(5), 845‒857. google scholar
  • Haller, S. A., & Hyland, M. (2014). Capital-energy substitution: Evidence from a panel of Irish manufacturing firms. Energy Economics, 45, 501–510. google scholar
  • Kim, J., & Heo, E. (2013). Asymmetric substitutability between energy and capital: Evidence from the manufacturing sectors in 10 OECD countries. Energy Economics, 40, 81–89. google scholar
  • Lazkano, I., & Pham, L. (2016). Can Capital-Energy Substitution Foster Economic Growth? Land Economics, 92(3), 491–514. doi:10.3368/le.92.3.491 google scholar
  • Nguyen, S., & Strietwiesser, M. (1997). Capital-energy substitution revisited new evidence from micro data, Center for Economic Studies (CES), Research Paper 97/4. google scholar
  • Özatalay, S., Grubaugh, S., & Long, T. V. (1979). Energy Substitution and National Energy Policy. The American Economic Review, 69(2), 369‒371. google scholar
  • Palivos, T., & Karagiannis, G. (2010). The Elasticity of Substitution as an Engine of Growth. Macroeconomic Dynamics, 14(5), 617–628. https://doi.org/10.1017/S1365100509 000479 google scholar
  • Pindyck, R. S. (1979). Interfuel Substitution and the Industrial Demand for Energy: An International Comparison. The Review of Economics and Statistics, 61(2), 169‒179. google scholar
  • Revankar, N. S. (1971). A Class of Variable Elasticity of Substitution Production Functions. Econometrica, 39(1), 61‒71. https://doi.org/10.2307/1909140 google scholar
  • Revankar, N. S. (1971). Capital-Labor Substitution, Technological Change, and Economic Growth: The U.S. Experience, 1929-1953. Metroeconomica, 23(2), 154–176. https://doi.org/10.1111/j.1467-999X.1971.tb00168.x google scholar
  • Stern, D. I. (2011). The Role of Energy in Economic Growth, (SSRN Scholarly Paper No. ID 1878863). Rochester, NY: Social Science Research Network. https://papers.ssrn.com/abstract=1878863 google scholar
  • Thompson, P., & Taylor, T. G. (1995). The Capital-Energy Substitutability Debate: A New Look. The Review of Economics and Statistics, 77(3), 565‒569. https://doi.org/10.2307/2109916 google scholar
  • Tovar, M. A., & Iglesias, E. M. (2013). Capital-Energy Relationships: An Analysis when Disaggregating by Industry and Different Types of Capital. The Energy Journal, 34(4), 129‒150. google scholar
  • van Zon, A., & Yetkiner, I. H. (2003). An endogenous growth model with embodied energy-saving technical change. Resource and Energy Economics, 25(1), 81‒103. https://doi.org/10.1016/S0928-7655(02)00018-0. google scholar

Citations

Copy and paste a formatted citation or use one of the options to export in your chosen format


EXPORT



APA

Altunç, Ö.F., & Yıldırım, A. (2020). Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries. Siyasal: Journal of Political Sciences, 29(2), 367-378. https://doi.org/10.26650/siyasal.2020.29.2.0087


AMA

Altunç Ö F, Yıldırım A. Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries. Siyasal: Journal of Political Sciences. 2020;29(2):367-378. https://doi.org/10.26650/siyasal.2020.29.2.0087


ABNT

Altunç, Ö.F.; Yıldırım, A. Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries. Siyasal: Journal of Political Sciences, [Publisher Location], v. 29, n. 2, p. 367-378, 2020.


Chicago: Author-Date Style

Altunç, Ömer Faruk, and Abdulmecit Yıldırım. 2020. “Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries.” Siyasal: Journal of Political Sciences 29, no. 2: 367-378. https://doi.org/10.26650/siyasal.2020.29.2.0087


Chicago: Humanities Style

Altunç, Ömer Faruk, and Abdulmecit Yıldırım. “Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries.” Siyasal: Journal of Political Sciences 29, no. 2 (May. 2024): 367-378. https://doi.org/10.26650/siyasal.2020.29.2.0087


Harvard: Australian Style

Altunç, ÖF & Yıldırım, A 2020, 'Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries', Siyasal: Journal of Political Sciences, vol. 29, no. 2, pp. 367-378, viewed 17 May. 2024, https://doi.org/10.26650/siyasal.2020.29.2.0087


Harvard: Author-Date Style

Altunç, Ö.F. and Yıldırım, A. (2020) ‘Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries’, Siyasal: Journal of Political Sciences, 29(2), pp. 367-378. https://doi.org/10.26650/siyasal.2020.29.2.0087 (17 May. 2024).


MLA

Altunç, Ömer Faruk, and Abdulmecit Yıldırım. “Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries.” Siyasal: Journal of Political Sciences, vol. 29, no. 2, 2020, pp. 367-378. [Database Container], https://doi.org/10.26650/siyasal.2020.29.2.0087


Vancouver

Altunç ÖF, Yıldırım A. Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries. Siyasal: Journal of Political Sciences [Internet]. 17 May. 2024 [cited 17 May. 2024];29(2):367-378. Available from: https://doi.org/10.26650/siyasal.2020.29.2.0087 doi: 10.26650/siyasal.2020.29.2.0087


ISNAD

Altunç, ÖmerFaruk - Yıldırım, Abdulmecit. “Capital - Energy Substitution: Does Energy Sources Matter for the Elasticity of Substitution? An Empirical Investigation for OECD Countries”. Siyasal: Journal of Political Sciences 29/2 (May. 2024): 367-378. https://doi.org/10.26650/siyasal.2020.29.2.0087



TIMELINE


Submitted03.12.2019
Accepted08.08.2020
Published Online30.10.2020

LICENCE


Attribution-NonCommercial (CC BY-NC)

This license lets others remix, tweak, and build upon your work non-commercially, and although their new works must also acknowledge you and be non-commercial, they don’t have to license their derivative works on the same terms.


SHARE




Istanbul University Press aims to contribute to the dissemination of ever growing scientific knowledge through publication of high quality scientific journals and books in accordance with the international publishing standards and ethics. Istanbul University Press follows an open access, non-commercial, scholarly publishing.