WIOD (World Input-Output Database): Brief Overview of Data Construction Activities in WP3
WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the...
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Transcript of WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the...
![Page 1: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/1.jpg)
WIOD Consortium Meeting
Sevilla, 25 – 26, May, 2011
Embodied and induced technical change and the price of carbon
Kurt KratenaMichael Wueger
![Page 2: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/2.jpg)
Literature: embodied and induced technical change
• Models increasingly integrate features of endogenous technical change:
WITCH (Bosetti et al., 2006), CGE (Otto, Loeschel and Reilly, 2008)
• Endogenous innovation: (i) energy saving R&D, (ii) learning by doing for carbon-free technologies
• Popp (2002): energy saving innovation, Sue Wing (2006): technical change induced by climate policy climate policy creates the cost savings of it’s own measures
Critical issues and questions
• Induced innovation or diffusion of (existing) technologies?
• Difference between substitution of factors (for example K and E) and technical change (Binswanger and Ruttan, 1978 and Sue Wing, 2006)
• Are K and E substitutes or complements ? Does embodied and induced technical change only work with K and E substitutability ?
Technical change in E3 modelling
![Page 3: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/3.jpg)
K,L,E,M (Translog) model of production with embodied and induced technical change
• Factor bias & TFP (Binswanger and Ruttan, 1978; Jorgenson and Fraumeni, 1981, Jorgenson, 1984)
• Embodied technical change (Berndt, Kolstad and Lee,1993; Sue Wing and Eckaus, 2007)
• From embodied to induced technical change: K as short-run fixed factor plus investment function (first results with EUKLEMS data in Kratena, 2007)
• Model of dynamic factor demand (Pindyck and Rotemberg, 1983): forward looking, but no explicit adjustment costs
• Application to WIOD data (YL files, environmental satellites accounts) combining with EUKLEMS (release March 2008, including energy inputs) and IEA Energy Prices and Taxes
Technical change in E3 modelling
![Page 4: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/4.jpg)
Dynamic factor demand model: general
• Dynamic cost functions with short-run variable costs VC (prices pv of variable factors L, E, M), investment costs (K = capital stock, pI = investment price), gross output Q, labour L (second nest: different skills) , energy E, TFP, returns to scale and technical change bias
• Shephard’s Lemma and Euler condition:
• Euler condition without explicit adjustment costs just states that the shadow price of K equals the user costs of K.
Technical change in production
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![Page 5: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/5.jpg)
Translog model with non-constant returns to scale
Dynamic factor demand model
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![Page 6: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/6.jpg)
Translog model with constant returns to scale
Dynamic factor demand model
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![Page 7: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/7.jpg)
Dynamic factor demand model
Embodied and induced technical change•Derivation of the shadow price of capital derivation of the optimal stock K*:
•Impact of energy price on K* (long-run)
•Returns to scale ( measures the cost effect of Q):
•Increasing returns to scale: < 1.
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![Page 8: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/8.jpg)
Dynamic factor demand model
Capital stock adjustment and energy
•Forward looking adjustment of K to K*:
•Investment function (non-constant returns to scale)
•Input-output spill-overs of technical change through production of capital goods:
p = VC/Q + pKK/Q
•With Bij as the investment matrix (industries * commodities) for imports (MB) and domestic deliveries
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![Page 9: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/9.jpg)
Dynamic factor demand model
Embodied and induced technical change:energy
•Elasticity of E to K:
•Long-run elasticity of E:
VC
Kz
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![Page 10: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/10.jpg)
Estimation methodology
• Balanced panel for: AUT, DNK, FIN, NLD, GB, from 1980-2006
• GMM estimation with lagged exogenous (factor prices, output, capital stock, depreciation rate, rate of return) as instruments the expectation of K*t+1 is determined by all information in t capital stock adjustment can be due to expectation errors or shocks
• Estimating the full system with VC-function, factor demand for L and E and investment function ( log Kt+1) for non-constant and constant returns to scale
• Deriving returns to scale, own price elasticities, capital/energy and capital/labour elasticities (calculating shadow price of K), as well as long-run elasticities of E
• Restrictions: homogeneity, symmetry and concavity of the cost function (individual, for ‘problem cases’)
Dynamic factor demand model
![Page 11: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/11.jpg)
Data from WIOD, EUKLEMS and IEA (energy prices)
• Energy inputs in physical units (TJ) by about 20 energy carriers from WIOD environmental accounts
• IEA Energy Prices and Taxes for most of the energy carriers/countries (estimating missing data to fill gaps)
• Constructing an aggregate energy input in current prices (pE *E), volumes (E), and price of energy pE. The volume measure is based on aggregation of energy contents effective input (‘energy services’ like ‘labour servives’ and ‘capital srvices’ in EUKLEMS)
• Capital stock, GFCF deflators, depreciation rate (capital input files from EUKLEMS), benchmark interest rate (EUROSTAT), deflated with VA deflator (YL files, WIOD) user costs pI(r + )
• ‘Labour services’ (L) , compensation of employees from (pL*L) price of labour (pL) , data from YL files, WIOD
Dynamic factor demand model
![Page 12: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/12.jpg)
Estimation results: non-constant returns to scale
25 parameters out of 91 are insignificant
Embodied energy saving technical change: wood and cork, pulp and paper/printing, chemicals, rubber and plastics, basic metals and fabricated metal, electrical and optical equipment
Dynamic factor demand model
K
LL
LE
EE
KK
KL
KE
Food, beverages and tobacco -0.3064 0.0577 -0.0144 0.0121 -0.0337 0.0619 0.0148
(0.1235) *** (0.0245) ** (0.0022) *** (0.0009) *** (0.0811) (0.0156) *** (0.0015) ***Textiles, leather and footwear -0.7704 0.0168 -0.0051 0.0131 0.3874 0.0041 0.0025
(0.1366) *** (0.0329) (0.0035) * (0.0018) *** (0.1214) *** (0.0160) (0.0017) *Wood and cork -1.8256 0.1528 -0.0156 0.0110 -1.1409 0.0340 -0.0003
(0.3106) *** (0.0262) *** (0.0061) *** (0.0000) *** (0.1446) *** (0.0173) ** (0.0045)Pulp and paper, printing -1.1688 0.0109 0.0085 0.0250 0.6118 0.0421 -0.0045
(0.6125) ** (0.0285) (0.0094) (0.0001) *** (0.3202) ** (0.0165) ** (0.0097)Coke, refined petroleum and nuclear fuel -0.1471 -0.0091 -0.0526 0.0658 -0.8335 -0.0240 0.0050
(1.0648) (0.0195) (0.0062) *** (0.0146) *** (0.2745) *** (0.0085) *** (0.0181)Chemicals and chemical products 1.5429 0.1510 -0.0008 0.0229 1.2024 0.1722 -0.1248
(0.2262) *** (0.0207) *** (0.0092) (0.0078) *** (0.2953) *** (0.0178) *** (0.0136) ***Rubber and plastics -0.8230 0.0839 0.0027 0.0011 -1.1749 0.1260 -0.0149
(0.6449) (0.0195) *** (0.0099) *** (0.0122) ** (0.4804) * (0.0259) *** (0.0275) *Other non-metallic minerals -1.5436 -0.0326 -0.0249 0.0550 0.4000 0.0138 0.0441
(0.2738) *** (0.0219) (0.0074) *** (0.0001) *** (0.1644) ** (0.0109) (0.0105) ***
Basic metals and fabricated metal -0.3972 0.1629 -0.0188 0.0417 -0.1735 0.1723 -0.0581
(0.1947) ** (0.0211) *** (0.0074) *** (0.0052) *** (0.1242) (0.0104) *** (0.0063) ***Machinery -0.2171 0.1076 -0.0012 0.0054 0.4780 0.1012 0.0000
(0.2187) (0.0132) *** (0.0025) (0.0011) *** (0.1223) *** (0.0066) *** (0.0014)Electrical and optical equipment -0.0358 0.0690 -0.0005 0.0070 -0.1320 0.0639 -0.0019
(0.1468) (0.0316) (0.0045) (0.0000) *** (0.0443) *** (0.0130) *** (0.0017)Transport equipment -0.2724 0.1700 0.0134 0.0072 -0.5835 0.0574 0.0009
(0.3201) (0.0000) *** (0.0065) ** (0.0031) ** (0.1525) *** (0.0187) *** (0.0032)Other manufacturing -1.2236 0.0358 -0.0082 0.0136 -0.1043 0.1448 0.0016
(0.1927) *** (0.0328) (0.0076) (0.0006) *** (0.0295) *** (0.0144) *** (0.0057)
![Page 13: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/13.jpg)
Estimation results: constant returns to scale
8 parameters out of 91 are insignificant
Embodied energy saving technical change: Coke, refined petroleum and nuclear fuel, chemicals, basic metals and fabricated metal
Dynamic factor demand model
Q
LL
LE
EE
KL
KE
QK
Food, beverages and tobacco 1.7855 0.0859 -0.0036 0.0151 0.0658 0.0090 0.8386
(0.1243) *** (0.0100) *** (0.0017) ** (0.0000) *** (0.0058) *** (0.0006) *** (0.1582) ***Textiles, leather and footwear 1.5012 -0.0390 -0.0060 0.0123 -0.0561 0.0030 0.2458
(0.0785) *** (0.0213) * (0.0037) * (0.0013) *** (0.0118) *** (0.0011) *** (0.1347) *Wood and cork 1.1515 0.1358 0.0060 0.0163 0.0125 0.0084 0.5162
(0.2228) *** (0.0185) *** (0.0057) (0.0025) *** (0.0123) (0.0025) *** (0.4424)Pulp and paper, printing 0.0481 -0.1672 0.0464 0.0212 -0.0966 0.0423 -1.2639
(0.2789) (0.0392) *** (0.0181) ** (0.0107) ** (0.0124) *** (0.0038) *** (0.4518) ***Coke, refined petroleum and nuclear fuel 3.3571 -0.0430 -0.0463 0.0393 -0.0272 -0.0080 3.7159
(0.5714) *** (0.0177) ** (0.0066) *** (0.0095) *** (0.0075) *** (0.0124) (0.7940) ***Chemicals and chemical products 0.9078 0.1553 0.0367 -0.0117 0.1763 -0.1656 -4.2503
(0.0889) *** (0.0000) *** (0.0072) *** (0.0063) * (0.0146) *** (0.0130) *** (0.7219) ***Rubber and plastics 0.9011 0.0542 0.0297 0.0266 0.0974 -0.0479 -0.1035
(0.1146) *** (0.0174) *** (0.0102) *** (0.0082) *** (0.0154) *** (0.0169) *** (0.0553) *Other non-metallic minerals 0.6591 0.1429 0.0101 0.0513 -0.0381 0.0160 -1.2287
(0.2074) *** (0.0156) *** (0.0059) * (0.0001) *** (0.0077) *** (0.0041) *** (0.3890) ***
Basic metals and fabricated metal 1.1697 0.1699 -0.0115 0.0372 0.0914 -0.0325 0.3441
(0.0752) *** (0.0000) *** (0.0112) (0.0040) *** (0.0071) *** (0.0034) *** (0.1777) *Machinery -0.0441 0.1694 0.0205 0.0047 0.1205 0.0064 -1.7631
(0.0976) (0.0141) *** (0.0018) *** (0.0013) *** (0.0057) *** (0.0008) *** (0.2056) ***Electrical and optical equipment 1.1576 0.0766 0.0062 0.0061 0.0719 0.0008 -0.0281
(0.0234) *** (0.0218) *** (0.0035) * (0.0013) *** (0.0106) *** (0.0010) (0.0127) **Transport equipment 2.0841 0.1703 0.1035 0.0141 0.0339 0.0179 1.0262
(0.1248) *** (0.0000) *** (0.0097) *** (0.0030) *** (0.0101) *** (0.0031) *** (0.1425) ***Other manufacturing 1.0372 -0.0429 -0.0301 0.0132 0.1364 0.0188 0.4420
(0.0730) *** (0.0224) * (0.0036) *** (0.0004) *** (0.0072) *** (0.0030) *** (0.0990) ***
![Page 14: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/14.jpg)
Estimation results: non-constant returns to scale
Factor bias: (i) labour saving in all industries, (ii) energy saving in: chemicals, other non-metallic minerals, basic metals and fabricated metal, machinery, electrical and optical equipment, and transport equipment
Dynamic factor demand model
t
t t
tK
tL
tE
Food, beverages and tobacco -0.0380 0.0000 -0.0037 -0.0005 0.0006
(-0.0025) *** (0.0001) (-0.0010) *** (0.0009) (-0.0001) ***Textiles, leather and footwear -0.0236 -0.0002 0.0048 -0.0028 0.0005
(-0.0053) *** (-0.0001) * (-0.0016) *** (-0.0011) *** (-0.0001) ***
Wood and cork -0.0287 0.0002 0.0022 -0.0038 0.0003
(-0.0070) *** (-0.0001) * (0.0028) (-0.0007) *** (-0.0001) *Pulp and paper, printing -0.0408 -0.0001 -0.0062 -0.0028 0.0003
(-0.0144) *** (0.0001) (0.0058) (-0.0009) *** (0.0004)Coke, refined petroleum and nuclear fuel 0.1636 -0.0020 -0.0067 -0.0009 0.0036
(-0.0434) *** (0.0007) *** (0.0073) (0.0007) (0.0011) ***Chemicals and chemical products 0.0146 0.0006 0.0161 -0.0037 -0.0030
(0.0076) ** (0.0002) *** (0.0053) *** (0.0009) *** (0.0005) ***Rubber and plastics -0.0591 0.0001 -0.0237 -0.0023 0.0006
(0.0102) (0.0002) ** (0.0063) (0.0006) *** (0.0005)Other non-metallic minerals -0.0179 -0.0001 0.0157 -0.0007 -0.0009
(0.0045) *** (0.0001) (0.0019) *** (0.0006) (0.0003) ***Basic metals and fabricated metal 0.0104 0.0004 -0.0088 -0.0046 -0.0003
(0.0066) * (0.0001) *** (0.0027) *** (0.0007) *** (0.0003)Machinery -0.0305 0.0002 -0.0012 -0.0059 -0.0002
(0.0070) *** (0.0001) * (0.0025) (0.0003) *** (0.0001) ***Electrical and optical equipment 0.0159 0.0013 0.0027 -0.0083 -0.0004
(0.0127) (0.0001) *** (0.0026) (0.0012) *** (0.0002) ***Transport equipment 0.0019 0.0003 0.0002 -0.0073 -0.0004
(0.0056) (0.0002) ** (0.0022) (0.0006) *** (0.0002) **Other manufacturing -0.0539 0.0001 -0.0103 -0.0033 0.0011
(0.0053) *** (0.0002) (0.0021) *** (0.0011) *** (0.0003) ***
![Page 15: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/15.jpg)
Estimation results: constant returns to scale
Factor bias: (i) labour saving in all industries except pulp and paper, (ii) energy saving in a majority of industries
Dynamic factor demand model
t
t t
tK
tL
tE
Food, beverages and tobacco 0.0014 0.0001 0.0143 -0.0017 0.0003
(0.0047) (0.0002) (0.0039) *** (0.0005) *** (0.0001) ***Textiles, leather and footwear 0.0159 -0.0008 0.0247 -0.0016 0.0004
(0.0046) *** (0.0002) *** (0.0029) *** (0.0009) * (0.0001) ***
Wood and cork -0.0315 0.0011 -0.0176 -0.0037 -0.0002
(0.0063) *** (0.0003) *** (0.0085) ** (0.0007) *** (0.0002)Pulp and paper, printing -0.0178 0.0002 -0.0122 0.0041 -0.0013
(0.0071) ** (0.0003) (0.0061) ** (0.0012) *** (0.0006) **Coke, refined petroleum and nuclear fuel 0.0737 -0.0043 0.0465 -0.0004 0.0044
(0.0222) *** (0.0013) *** (0.0186) ** (0.0006) (0.0007) ***Chemicals and chemical products -0.0122 0.0011 0.0643 -0.0026 -0.0060
(0.0031) *** (0.0002) *** (0.0113) *** (0.0004) *** (0.0004) ***Rubber and plastics -0.0490 0.0026 -0.0062 -0.0013 -0.0017
(0.0066) *** (0.0004) *** (0.0061) (0.0006) ** (0.0004) ***Other non-metallic minerals -0.0298 0.0019 0.0109 -0.0044 -0.0014
(0.0063) *** (0.0004) *** (0.0041) *** (0.0004) *** (0.0002) ***Basic metals and fabricated metal -0.0331 0.0017 -0.0003 -0.0037 -0.0009
(0.0036) *** (0.0002) *** (0.0030) (0.0003) *** (0.0003) ***Machinery 0.0120 -0.0002 0.0217 -0.0061 -0.0004
(0.0069) * (0.0002) (0.0057) *** (0.0004) *** (0.0001) ***Electrical and optical equipment -0.0231 0.0014 0.0178 -0.0084 -0.0004
(0.0019) *** (0.0001) *** (0.0012) *** (0.0008) *** (0.0001) ***Transport equipment -0.0040 0.0007 0.0224 -0.0053 -0.0020
(0.0044) (0.0002) *** (0.0036) *** (0.0004) *** (0.0002) ***Other manufacturing -0.0371 0.0014 -0.0141 -0.0008 0.0020
(0.0043) *** (0.0002) *** (0.0028) *** (0.0009) (0.0002) ***
![Page 16: WIOD Consortium Meeting Sevilla, 25 – 26, May, 2011 Embodied and induced technical change and the price of carbon Kurt Kratena Michael Wueger.](https://reader035.fdocuments.in/reader035/viewer/2022062618/5514c70e550346b0478b4a62/html5/thumbnails/16.jpg)
Estimation results: elasticities, non-constant returns to scale
price elasticity of E : - 0.2, of L : - 0.5 .
Negative energy/capital elasticities (K and E are substitutes):
pulp and paper/printing, chemicals, rubber and plastics, basic metals and fabricated metal, machinery, electrical and optical equipment
Energy saving embodied technical change
Dynamic factor demand model
EE LL EK LK
Food, beverages and tobacco -0.2595 -0.4773 0.8845 0.3742 1.0165Textiles, leather and footwear -0.0791 -0.6458 0.1587 -0.0010 1.0126
Wood and cork -0.1494 -0.1316 0.0489 0.2075 0.8908Pulp and paper, printing -0.1339 -0.6706 -0.1159 0.1824 0.9614
Coke, refined petroleum and nuclear fuel -0.1092 -1.1677 0.2276 -0.3925 0.8844Chemicals and chemical products -0.5682 -0.0404 -1.9717 0.7897 1.0518
Rubber and plastics -0.4759 -0.4773 -0.2467 0.6514 0.7445Other non-metallic minerals -0.0160 -0.7898 0.5935 -0.0936 1.1096
Basic metals and fabricated metal -0.0742 -0.1115 -1.1123 0.7391 0.9279Machinery -0.4165 -0.3362 -0.0240 0.3023 1.0028
Electrical and optical equipment -0.0810 -0.4551 -0.1248 0.3502 0.8846Transport equipment -0.2061 -0.0220 0.1149 0.2678 1.0052Other manufacturing -0.0397 -0.6047 0.0783 0.3875 1.0005
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Estimation results: elasticities, constant returns to scale
Negative energy/capital elasticities (K and E are substitutes): coke, refined petroleum and nuclear fuel, chemicals, rubber and plastics, basic metals and fabricated metal
Three industries show energy saving embodied technical change in both specifications: chemicals, rubber and plastics, basic metal/fabricated metal
Dynamic factor demand model
EE LL EK LK
Food, beverages and tobacco -0.0766 -0.3066 0.5721 0.4304Textiles, leather and footwear -0.1292 -0.8412 0.1972 -0.2049
Wood and cork -0.1035 -0.1998 0.5357 -0.0466Pulp and paper, printing -0.2587 -1.3081 1.5026 -0.2380
Coke, refined petroleum and nuclear fuel -0.1422 -2.0352 -0.0056 -0.6921Chemicals and chemical products -1.0836 -0.0191 -2.7513 0.6553
Rubber and plastics -0.1107 -0.5175 -1.5797 0.2704Other non-metallic minerals -0.0772 -0.2258 0.3545 -0.0330
Basic metals and fabricated metal -0.1676 -0.0853 -0.6477 0.3698Machinery -0.4928 -0.1390 0.5788 0.2823
Electrical and optical equipment -0.2030 -0.4283 0.1732 0.3288
Transport equipment -0.0906 -0.0208 1.9192 0.1459
Other manufacturing -0.0702 -0.7703 1.3564 0.4615
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Estimation results: embodied and induced technical change
• Two industries with embodied energy saving technical change in the case of non-constant returns to scale, but not with constant returns: pulp and paper/printing, electrical and optical equipment
• Are non-constant returns to scale an additional source of technical change? (some industres with decreasing returns !)
• Main disadvantage of this approach:
• (Price) induced technical change is only possible, when K and E are substitutes and investment reacts positive to energy price shocks further reduction of number of industries with embodied plus induced energy saving technical change
Dynamic factor demand model
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Estimation results: long-run price elasticities of E
Starting point: industries with embodied energy saving technical change
Is there also induced energy saving technical change ? =
Is the long-run price elasticity of E higher than the short-run ?
Dynamic factor demand model
non-constant rs non-constant rs constant rs constant rs EE EE EE EE
Food, beverages and tobacco -0.2595 0.1276 -0.0766 0.0503
Textiles, leather and footwear -0.0791 -0.0801 -0.1292 -0.1309
Wood and cork -0.1494 -0.1494 -0.1035 -0.1036
Pulp and paper, printing -0.1339 -0.1347 -0.2587 -0.2437
Coke, refined petroleum and nuclear fuel -0.1092 -0.1078 -0.1422 -0.1422
Chemicals and chemical products -0.5682 -0.7728 -1.0836 -1.3512
Rubber and plastics -0.4759 -0.9150 -0.1107 -0.0920
Other non-metallic minerals -0.0160 -0.0815 -0.0772 -0.1400
Basic metals and fabricated metal -0.0742 0.2981 -0.1676 -0.0022
Machinery -0.4165 -0.4165 -0.4928 -0.4928
Electrical and optical equipment -0.0810 -0.0792 -0.2030 -0.2055
Transport equipment -0.2061 -0.2059 -0.0906 0.5446
Other manufacturing -0.0397 -0.0364 -0.0702 -0.0613
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Embodied & induced technical change
Non-constant returns to scale
Starting point: industries with embodied energy saving technical change: pulp and paper/printing, chemicals, rubber and plastics, basic metals and fabricated metal, machinery, electrical and optical equipment
Long-run elasticity of E (EE) > short-run elasticity (EE) = induced technical change: pulp and paper/printing, chemicals, rubber and plastics, machinery
Dynamic factor demand model
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Embodied & induced technical change
Constant returns to scale
Starting point: industries with embodied energy saving technical change: coke, refined petroleum and nuclear fuel, chemicals, rubber and plastics, basic metals and fabricated metal
Long-run elasticity of E (EE) > short-run elasticity (EE) = induced technical change: chemicals
Dynamic factor demand model
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Conclusions and Future Research
Conclusions
• Dynamic Translog factor demand model allows for diverse sources/types of technical change: returns to scale, TFP, factor bias, embodied and induced technical change.
• Technical change/progress is only partly energy saving, also for embodied technical change
• Disadvantage: embodied technical change is only energy saving, if E and K are substitutes induced technical change is only energy saving, if E and K are substitutes plus if investment reacts positively to energy prices.
Future research
• Allowing for embodied technical change in the case that E and K are complements vintage model for aggregate K.