Energy-Saving Technical Change

Hassler, John; Krusell, Per; Olovsson, Conny

Download This Paper

Open PDF in Browser

Add Paper to My Library

Energy-Saving Technical Change

NBER Working Paper No. w18456

41 Pages Posted: 13 Oct 2012 Last revised: 6 Jun 2022

See all articles by John Hassler

John Hassler

Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Per Krusell

Princeton University - Department of Economics; Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR)

Conny Olovsson

Sveriges Riksbank

Date Written: October 2012

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.

Suggested Citation: Suggested Citation

Hassler, John and Krusell, Per L. and Olovsson, Conny, Energy-Saving Technical Change (October 2012). NBER Working Paper No. w18456, Available at SSRN: https://ssrn.com/abstract=2161203