Costly capital reallocation and energy use

Luis Puch and María Guilló
Authors registered in the RePEc Author Service: Antonia Díaz

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: In thime series data, energy use does not change much with energy price changes. However, energy use is responsive to international differences in energy prices in cross-section data across countries. In this paper we consider a model of energy use in which production takes place at individual plants and capital can be used either to directly produce output or to reduce toe energy required to run the plant. We assume that reallocating capital from one use to another is costly. This turns out to be crucial for the quantitative properties of the model to be in conformity with the low short-run and high long-run elasticities of energy use seen in data. Furthermore, our model displays variations in capacity utilization that are in line with those observed during the period of major oil price increases.

Date: 2001-05
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Related works:
Journal Article: Costly Capital Reallocation and Energy Use (2004)
Working Paper: COSTLY CAPITAL REALLOCATION AND ENERY USE (2002)
Working Paper: Costly capital reallocation and energy use (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we015215

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