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Energy-saving technical change

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  • Hassler, John
  • Krusell, Per
  • Olovsson, Conny

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 energysaving technical change appears to respond strongly to the oilprice 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

Suggested Citation

  • Hassler, John & Krusell, Per & Olovsson, Conny, 2015. "Energy-saving technical change," LSE Research Online Documents on Economics 86280, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:86280
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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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