Fueling the US Economy: Energy as a Production Factor from the Great Depression Until Today

FCN Working Paper No. 02/2017

26 Pages Posted: 9 Nov 2017 Last revised: 5 Jan 2018

See all articles by Julius Frieling

Julius Frieling

RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN)

Reinhard Madlener

RWTH Aachen University

Date Written: May 1, 2017

Abstract

We analyze the relationship between factor augmenting technical change and factor substitution through a nested CES function using capital, labor, and energy inputs. We use US aggregate data on output, factor use, and factor prices for the years 1929–2015 to show the interdependence and coevolution of the different input factors. We demonstrate the robustness of the system of equations approach for estimating such a production function. We find that the input factors are gross complements, and that in the time period considered, technical change was mostly labor saving, while the linear time trend of energy augmenting technical change was zero.

Keywords: aggregate production, technical change, multi-factor production, energy demand

JEL Classification: C13, C32, E23, O33, Q43

Suggested Citation

Frieling, Julius and Madlener, Reinhard, Fueling the US Economy: Energy as a Production Factor from the Great Depression Until Today (May 1, 2017). FCN Working Paper No. 02/2017. Available at SSRN: https://ssrn.com/abstract=3066173 or http://dx.doi.org/10.2139/ssrn.3066173

Julius Frieling (Contact Author)

RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN) ( email )

Mathieustrasse 6
Aachen, 52074
Germany

Reinhard Madlener

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustraße 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

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