Stern, David I. (2009): Interfuel Substitution: A Meta-Analysis.
This is the latest version of this item.
Download (1MB) | Preview
Interfuel substitutability has been of longstanding interest to the energy economics and policy community. However, no quantitative meta-analysis has yet been carried out of this literature. This paper fills this gap by analyzing a broad sample of studies of interfuel substitution in the industrial sector, manufacturing industry or subindustries, or macro-economy of a variety of developed and developing economies. Publication bias is controlled for by including the primary study sample size in the meta-regression. Results for the shadow elasticities of substitution between coal, oil, gas, and electricity for forty-six primary studies show that at the level of the industrial sector there are easy substitution possibilities between all the fuel pairs with the exception of gas-electricity and coal-electricity. Substitution possibilities seem more constrained at the macro level and less constrained in sub-industries. Estimates also vary across countries. Publication bias does not seem to be present, but model and data specification issues very significantly affect the estimates derived by each individual study. Estimates from cross-section regressions are generally largest, fixed effects panel estimates intermediate in magnitude, and time-series estimates are mostly much smaller. Econometric research suggests that the fixed effects estimates are likely the best among the existing studies, though biased downwards.
|Item Type:||MPRA Paper|
|Original Title:||Interfuel Substitution: A Meta-Analysis|
|Keywords:||Meta-analysis; energy; substitution; elasticity; interfuel|
|Subjects:||Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q40 - General
D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity
|Depositing User:||David I. Stern|
|Date Deposited:||18. Jun 2009 11:18|
|Last Modified:||13. Mar 2015 11:15|
Agostini, P., Botteon, M., Carraro, C., 1992. A carbon tax to reduce CO2 emissions in Europe. Energy Economics 14(4), 279-290.
Andrikopoulos, A. A., Brox, J. A., Paraskevopoulos, C. C., 1989. Interfuel and interfactor substitution in Ontario manufacturing, 1962-82. Applied Economics 21(12), 1667-1681.
Apostolakis, B. E., 1990. Interfuel and energy-capital complementarity in manufacturing-industries. Applied Energy 35(2), 83-107.
Bacon, R., 1992. Measuring the possibilities of interfuel substitution. Policy Research Working Paper Series 1031. The World Bank: Washington, DC.
Baltagi, B. H., 2008. Econometric Analysis of Panel Data, 4th edition. John Wiley & Sons: Chichester.
Baltagi, B. H., Griffin, J. M., 1984. Short and long run effects in pooled models. International Economic Review 25(3), 631-645.
Baltagi, B. H., Griffin, J. M., 1997. Pooled estimators vs their heterogeneous counterparts in the context of dynamic demand for gasoline. Journal of Econometrics 77(2), 303-327.
Baltagi, B. H., Griffin, J. M., Xiong, W. W., 2000. To pool or not to pool: Homogeneous versus heterogeneous estimators applied to cigarette demand. Review of Economics and Statistics 82(1), 117-126.
Begg, C. B., Berlin, J. A., 1988. Publication bias: a problem in interpreting medical data. Journal of the Royal Statistical Society (Series A) 151, 419–445.
Borges, A. M., Pereira, A. M., 1992. Energy demand in Portuguese manufacturing - a 2-stage model. Energy 17(1), 61-77.
Bousquet, A. and Ladoux, N., 2006. Flexible versus designated technologies and interfuel substitution. Energy Economics 28, 426–443.
Boys, K. A., Florax, R. J.G.M., 2007. Meta-Regression Estimates for CGE Models: A Case Study for Input Substitution Elasticities in Production Agriculture. Selected Paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Portland, OR, July 29 – August 1, 2007.
Broer, P., 2004. The elasticities of complementarity and substitution. Tinbergen Institute Discussion Paper TI 2004-101/1.
Buranakunaporn, S., Oczkowski, E., 2007. A dynamic econometric model of Thailand manufacturing energy demand. Applied Economics 39(17), 2261-2267.
Buse, A., 1973. Goodness of fit in generalized least squares estimation. American Statistician 27(3), 106-108. Chambers, R., 1988. Applied Production Analysis. Cambridge University Press: Cambridge.
Cho, W. G., Nam, K., Pagan, J. A., 2004. Economic growth and interfactor/interfuel substitution in Korea, Energy Economics 26, 31–50.
Christopoulos, D. K., 2000. The demand for energy in Greek manufacturing. Energy Economics 22(5), 569-586.
Considine, T. J., 1989. Separability, functional form and regulatory policy in models of interfuel substitution. Energy Economics 11(2), 82-94.
Duncan, R. C..,Binswanger, H. P., 1976. Energy sources: substitutability and biases in Australia. Australian Economic Papers 15(27), 289 – 301.
Egger, P., Pfaffermayr, M., 2004. Estimating long and short run effects in static panel models. Econometric Reviews 23(3), 199–214.
Eltony, M. N., 2008. Estimating energy price elasticities for the non-oil manufacturing industries in Kuwait. OPEC Review 32(2), 184-195.
Fisher-Vanden, K., Jefferson, G. H., Liu, H., Tao, Q., 2004. What is driving China’s decline in energy intensity? Resource and Energy Economics 26, 77–97.
Floros, N. and Vlachou, A.. 2005. Energy demand and energy-related CO2 emissions in Greek manufacturing: Assessing the impact of a carbon tax. Energy Economics 27(3), 387-413.
Fuss, M. A., 1977. The demand for energy in Canadian manufacturing. Journal of Econometrics, 5(1), 89-116.
Greene, W. H., 1993. Econometric Analysis. 2nd edition. Macmillan: New York.
Griffin, J. A., Gregory, P. R., 1976. An intercountry translog model of energy substitution responses. American Economic Review 66, 845-857.
Griliches, Z., Mairesse, J., 1987. Productivity and R&D at the firm level. In: Griliches, Z. (ed.) R & D, Patents, and Productivity. University of Chicago Press: Chicago IL.
Hall, V. B., 1983. Industrial sector interfuel substitution following the first major oil shock. Economics Letters 12(3-4), 377-382.
Hall, V. B., 1986. Major OECD country industrial sector interfuel substitution estimates, 1960–79. Energy Economics 8(2), 74-89.
Halvorsen, R., 1977. Energy substitution in U.S. manufacturing. Review of Economics and Statistics 59(4), 381-388.
Hang, L., Tu,, M., 2007. The impacts of energy prices on energy intensity: Evidence from China. Energy Policy 35(5), 2978-2988.
Harper, C., Field, B. C., 1983. Energy substitution in United-States manufacturing - a regional approach. Southern Economic Journal 50(2), 385-395.
Harvey, A. C., Marshall, P., 1991. Inter-fuel substitution, technical change and the demand for energy in the UK economy. Applied Economics 23, 1077-1086.
Hauk, W. R., Wacziarg, R., 2006. A Monte Carlo study of growth regressions. Stanford Graduate School of Business Research Paper No. 1836 (R1).
Hausman, J., 2001. Mismeasured variables in econometric analysis: problems from the right and problems from the left. Journal of Economic Perspectives, 15(4), 57–67.
Heston, A., Summers R., Aten, B., 2006. Penn World Table Version 6.2. Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania.
Iqbal, M., 1986. Substitution of labor, capital and energy in the manufacturing sector of Pakistan. Empirical Economics 11(2), 81-95.
Jones, C. T., 1996. A pooled dynamic analysis of interfuel substitution in industrial energy demand by the G-7 countries. Applied Economics 28, 815-821.
Jones, C.T., 1995. A dynamic analysis of the interfuel substitution in US industrial energy demand. Journal of Business and Economic Statistics 13, 459-465.
Kim, B. C., Labys, W. C., 1988. Application of the translog model of energy substitution to developing-countries - the case of Korea. Energy Economics 10(4), 313-323.
Koetse, M. J., de Groot, H. L. F., Florax, R. J. G. M., 2008. Capital-energy substitution and shifts in factor demand: A meta-analysis. Energy Economics 30, 2236–2251.
Klump, R., de la Grandville, O., 2000. Economic growth and the elasticity of substitution: two theorems and some suggestions. American Economic Review 90(1), 282-291.
Lakshmanan, T. R., Anderson, W., Jourbachi, M., 1984. Regional dimensions of factor and fuel substitution in U.S. manufacturing. Regional Science and Urban Economics 14, 381-398.
Ma, H., Oxley, L., Gibson, J., Kim, B., 2008. China's energy economy: Technical change, factor demand and interfactor/interfuel substitution. Energy Economics 30, 2167–2183.
Ma, H., Oxley, L., Gibson, J., 2009. Substitution possibilities and determinants of energy intensity for China. Energy Policy 37, 1793–1804.
Magnus, J. R., Woodland, A. D., 1987. Inter-fuel substitution in Dutch manufacturing. Applied Economics 19(12), 1639-1664.
Mairesse, J., 1990. Time-series and cross-sectional estimates on panel data: Why are they different and why should they be equal? In: Hartog, J., Ridder, G., Theeuwes, J. (eds.) Panel Data and Labor Market Studies. Contributions to Economic Analysis No. 192., North-Holland: Amsterdam.
Mahmud, S. F., 2006. The energy demand in the manufacturing sector of Pakistan: some further results. Energy Economics 22, 641-648.
McFadden, D., 1963. Constant elasticity of substitution production functions. Review of Economic Studies 31,73-83.
Morana, C., 2000. Modelling evolving long-run relationships: an application to the Italian energy market. Scottish Journal of Political Economy 47(1), 72-93.
Mountain, D. C., Hsiao, C., 1989. A combined structural and flexible functional approach for modelling energy substitution. Journal of the American Statistical Association 84, 76-87.
Mountain, D. C., Stipdonk, B., Warren, C., 1989. Technological innovation and a changing energy mix – a parametric and flexible approach to modelling Ontario manufacturing. Energy Journal 10(4), 139-158.
Murty, M. N., 1986. Interfuel substitution and derived demand for inputs in the manufacturing sector of India. Journal of Quantitative Economics 2(1), 119-135.
Nelson, J. P., Kennedy, P. E., 2009. The use, and (abuse) of meta-analysis in environmental and natural resource economics: an assessment. Environmental and Resource Economics 42, 345-377.
Perkins, F. C., 1994. A dynamic analysis of Japanese energy policies: Their impact on fuel switching and conservation. Energy Policy 22(7), 595-607.
Pesaran, M. H., Smith, R., 1995. Estimating long-run relationships from dynamic heterogeneous panels. Journal of Econometrics 68(1), 79-113.
Pindyck, R. S., 1979. Interfuel substitution and the industrial demand for energy: an international comparison. Review of Economics and Statistics 61(2), 169-179.
Pirotte, A., 1999. Convergence of the static estimation toward the long run effects of dynamic panel data models. Economics Letters 63(2), 151-158.
Renou-Maissant, P., 1999. Interfuel competition in the industrial sector of seven OECD countries. Energy Policy 27(2), 99-110.
Serletis, A., Shahmoradi, A., 2008. Semi-nonparametric estimates of interfuel substitution in U.S. energy demand. Energy Economics 30, 2123–2133.
Shin, E., 1981. Inter-energy substitution in Korea, 1962-1975. Journal of Economic Development 6(1), 33-46.
Söderholm, P., 1998. The modeling of fuel use in the power sector: A survey of econometric analyses. Journal of Energy Literature, 4(2), 3-27.
Stanley, T. D., 2001. Wheat from chaff: Meta-analysis as quantitative literature review. Journal of Economic Perspectives. 15(3), 131-150.
Stanley, T. D., 2005. Beyond publication bias. Journal of Economic Surveys. 19(3), 309-345.
Stern, D. I., 1994. Accuracy of the translog function. Applied Economics Letters 1, 172-174.
Stern, D. I., 1997. Limits to substitution and irreversibility in production and consumption: a neoclassical interpretation of ecological economics. Ecological Economics 21, 197-215.
Stern, D. I., 2008a. Derivation of the Hicks elasticity of substitution from the input distance function. Munich Personal RePEc Archive 12414.
Stern, D. I., 2008b. Elasticities of substitution and complementarity. Munich Personal RePEc Archive 12454.
Taheri, A. A., 1994. Oil Shocks and the dynamics of substitution adjustments of industrial fuels in the United-States. Applied Economics 26(8), 751-756.
Taheri, A. A., Stevenson, R. 2002. Energy price, environmental policy, and technological bias. Energy Journal 23(4), 85-107.
Truong, T. P., 1985. Interfuel and inter-factor substitution in NSW manufacturing-industry. Economic Record 61(174), 644-653.
Turnovsky, M., Folie, M., Ulph, A., 1982. Factor substitutability in Australian manufacturing with emphasis on energy inputs. Economic Record 58(160), 61-72.
Urga, G., 1999. An application of dynamic specifications of factor demand equations to interfuel substitution in US industrial energy demand. Economic Modelling 16(4), 503-513.
Urga, G., Walters, C., 2003. Dynamic translog and linear logit models: a factor demand analysis of interfuel substitution in US industrial energy demand. Energy Economics 25(1), 1-21.
Uri, N. D., 1979a. Energy demand and interfuel substitution in India. European Economic Review 12(2), 181-190.
Uri, N. D., 1979b. Energy substitution in the UK 1948-64. Energy Economics 1(4), 241-244.
Uri, N. D., 1982. Energy demand and interfuel substitution in the United Kingdom. Socio-Economic Planning Sciences 16(4), 157-162.
van Doel, I. T., Kiviet, J. F., 1994. Asymptotic consequences of neglected dynamics in individual effects models. Statistica Neerlandica 48(1), 71 – 85.
Vlachou, A., Samouilidis, E. J., 1986. Interfuel substitution: Results from several sectors of the Greek economy. Energy Economics 8(1), 39-45.
Westoby, R., 1984. Models of interfuel substitution in the UK. Journal of Economic Studies 11(1), 27-39.
Available Versions of this Item
Interfuel Substitution: A Meta-Analysis. (deposited 04. Mar 2009 15:27)
- Interfuel Substitution: A Meta-Analysis. (deposited 18. Jun 2009 11:18) [Currently Displayed]