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Alternative Technological Indices and Factor Demands in the Electric Power Industry

Randy Nelson

Year: 1987
Volume: Volume 8
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No3-7
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The role of technical progress as a means of extending energy resources, together with the widespread use of flexible functional forms, has led to increased interest in the estimation of nonneutral technical change in recent years. Studies by Binswanger (1974), Berndt and Khaled (1979), and Berndt and Wood (1982) at the aggregate level and Wills (1979), Toevs (1980), Moroney and Trapani (1981), and Jorgenson and Fraumeni (1981) at the sectoral level have provided estimates of biased technical change. Stevenson (1980), Gollop and Roberts (1981, 1983), and Nelson (1984, 1986) have also estimated models of nonneutral technical change for the electric power industry.Almost all these studies have two features in common. To begin with, they have employed a time trend to represent the rate at which new technology is introduced.' A recent study by Kopp and Smith (1985), however, indicates that time trends may fail to provide a consistent description of the direction of technical change and calls for the use of technologically explicit indicators of the pace of innovation.

International Evidence on Sectoral Interfuel Substitution

Apostolos Serletis, Govinda R. Timilsina and Olexandr Vasetsky

Year: 2010
Volume: Volume 31
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No4-1
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This paper estimates interfuel substitution elasticities in selected devel�oping and industrialized economies at the sector level. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally .exible normalized quadratic functional form, and provides evidence consistent with neo�classical microeconomic theory. The results indicate that the interfuel substitution elasticities are consistently below unity, revealing the limited ability to substitute between major energy commodities (i.e., coal, oil, gas, and electricity). We .nd that on average, industrial and residential sectors tend to exhibit higher potential for substitution between energy inputs as compared to the electricity generation and transportation sectors in all countries, with the United States being the only exception. In addition, we .nd that developed countries demonstrate higher po�tential for interfuel substitution in their industrial and transportation sectors as compared to the developing economies. The implication is that interfuel substi�tution depends on the structure of the economy, not the level of economic devel�opment. Moreover, higher changes in relative prices are needed than what we have already experienced to induce switching toward a lower carbon economy.

Sectoral Interfuel Substitution in Canada: An Application of NQ Flexible Functional Forms

Ali Jadidzadeh and Apostolos Serletis

Year: 2016
Volume: Volume 37
Number: Number 2
DOI: 10.5547/01956574.37.2.ajad
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This paper focuses on the aggregate demand for electricity, natural gas, and light fuel oil in Canada as a whole and six of its provinces - Quebec, Ontario, Manitoba, Saskatchewan, Alberta, and British Columbia - in the residential, commercial, and industrial sectors. We employ the locally flexible normalized quadratic (NQ) expenditure function (in the case of the residential sector) and the NQ cost function (in the case of the commercial and industrial sectors), treat the curvature property as a maintained hypothesis, and provide evidence consistent with neoclassical microeconomic theory. We find that the Morishima interfuel elasticities of substitution are in general positive and statistically significant. Our results indicate limited substitutability between electricity and natural gas, but strong substitutability between light fuel oil and each of electricity and natural gas in most cases.

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