Threshold Effects of Energy Price Changes

22 Pages Posted: 30 Oct 2000

See all articles by Daan van Soest

Daan van Soest

Tilburg University - CentER & Department of Economics

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business

Jan P. A. M. Jacobs

University of Groningen - Faculty of Economics and Business

Date Written: September 5, 2000

Abstract

This paper presents a theoretical model emphasising energy investments' characteristics of uncertainty and irreversibility. The theoretical model suggests threshold effects. Firms are induced to substitute away from energy only if prices of energy exceed a certain threshold level and they reverse the technology only if energy prices are low enough. Estimating a simple investment relation using panel data for the Dutch economy, we find evidence for threshold effects.

Keywords: threshold effects, energy substitution, environmental policy

JEL Classification: C23, D21, Q43

Suggested Citation

van Soest, Daan P. and Kuper, Gerard H. and Jacobs, Jan P.A.M., Threshold Effects of Energy Price Changes (September 5, 2000). Available at SSRN: https://ssrn.com/abstract=241004 or http://dx.doi.org/10.2139/ssrn.241004

Daan P. Van Soest

Tilburg University - CentER & Department of Economics ( email )

P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 2072 (Phone)

Gerard H. Kuper (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Jan P.A.M. Jacobs

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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