RT Journal Article
SR Electronic
T1 Can Capital-Energy Substitution Foster Economic Growth?
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 491
OP 514
DO 10.3368/le.92.3.491
VO 92
IS 3
A1 Itziar Lazkano
A1 Linh Pham
YR 2016
UL http://le.uwpress.org/content/92/3/491.abstract
AB We study the ease of substitution between energy and other production inputs over time. We first develop a growth model with energy where our general production function allows for a nonconstant elasticity of substitution. Theoretical results show that the ease of substitution between capital and energy increases over time with the energy-capital ratio. Next, using country-level data from 108 countries between 1971 and 2011, we provide empirical evidence for a nonconstant elasticity of substitution between capital and energy. Our results imply that policies that increase the speed of the capital-energy substitution can foster long-run economic growth. (JEL O11, Q43)