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Energy substitution: When model selection depends on the focus

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  • Behl, Peter
  • Dette, Holger
  • Frondel, Manuel
  • Tauchmann, Harald

Abstract

In contrast to conventional model selection criteria, the Focused Information Criterion (FIC) allows for the purpose-specific choice of model specifications. This accommodates the idea that one kind of model might be highly appropriate for inferences on a particular focus parameter, but not for another. Ever since its development, the FIC has been increasingly applied in the realm of statistics, but this concept appears to be virtually unknown in the literature on energy and production economics. Using the classical example of the Translog cost function and production data for 35 U.S. industry sectors (1960–2005), this paper provides for an empirical illustration of the FIC and demonstrates its usefulness in selecting production models, thereby focusing on the ease of substitution between energy and capital versus energy and labor.

Suggested Citation

  • Behl, Peter & Dette, Holger & Frondel, Manuel & Tauchmann, Harald, 2013. "Energy substitution: When model selection depends on the focus," Energy Economics, Elsevier, vol. 39(C), pages 233-238.
    • Handle: RePEc:eee:eneeco:v:39:y:2013:i:c:p:233-238
    DOI: 10.1016/j.eneco.2013.04.013
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    References listed on IDEAS

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    3. Behl, Peter & Dette, Holger & Frondel, Manuel & Tauchmann, Harald, 2012. "Choice is suffering: A Focused Information Criterion for model selection," Economic Modelling, Elsevier, vol. 29(3), pages 817-822.
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    Cited by:

    1. Behl, Peter & Dette, Holger & Frondel, Manuel & Vance, Colin, 2019. "A focused information criterion for quantile regression: Evidence for the rebound effect," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 223-227.

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    More about this item

    Keywords

    Information criteria; Translog cost function; Cross-price elasticities;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • D2 - Microeconomics - - Production and Organizations

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