Nonparametric Estimates of the Clean and Dirty Energy Substitutability

8 Pages Posted: 4 May 2018

See all articles by Emir Malikov

Emir Malikov

University of Nevada, Las Vegas

Kai Sun

Binghamton University

Subal C. Kumbhakar

State University of New York (SUNY) at Binghamton - Department of Economics

Date Written: March 14, 2018

Abstract

In growth theory, a greater-than-one elasticity of substitution between clean and dirty energy is among key necessary conditions for long-run green economic growth. Using parametric specifications, Papageorgiou et al. (2017) provide first estimates of this fundamentally important inter-energy substitution elasticity. We extend their work by relaxing restrictive functional-form assumptions about production technologies using flexible nonparametric methods. We find that the technological substitutability between clean and dirty energy inputs may not be that strong, especially in the case of a final-goods sector for which the inter-energy elasticity of substitution statistically exceeds one for at most a third of industries/countries. Hence, the favorability of technological conditions for long-run green growth may not be corroborated by the cross-country empirical evidence as strongly as previously thought.

Keywords: aggregate production function, clean and dirty energy, cross-country analysis, elasticity of substitution, environmental policy, green growth

JEL Classification: O44, O47, Q54, Q58

Suggested Citation

Malikov, Emir and Sun, Kai and Kumbhakar, Subal C., Nonparametric Estimates of the Clean and Dirty Energy Substitutability (March 14, 2018). Economics Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3164553

Emir Malikov (Contact Author)

University of Nevada, Las Vegas ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

Kai Sun

Binghamton University ( email )

PO Box 6001
Binghamton, NY 13902-6000
United States

HOME PAGE: http://bingweb.binghamton.edu/~ksun1/

Subal C. Kumbhakar

State University of New York (SUNY) at Binghamton - Department of Economics ( email )

Binghamton, NY 13902-6000
United States

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