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Title: Energy-Saving Technical Change

Author(s): John Hassler, Per Krusell and Conny Olovsson

Publication Date: October 2012

Keyword(s): directed technical change and energy saving

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Hassler, J, Krusell, P and Olovsson, C. 2012. 'Energy-Saving Technical Change'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9177