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The Role of Energy in the Industrial Revolution and Modern Economic Growth

David I. Stern and Astrid Kander

Year: 2012
Volume: Volume 33
Number: Number 3
DOI: 10.5547/01956574.33.3.5
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The expansion in the supply of energy services over the last couple of centuries has reduced the apparent importance of energy in economic growth despite energy being an essential production input. We demonstrate this by developing a simple extension of the Solow growth model, which we use to investigate 200 years of Swedish data. We find that the elasticity of substitution between a capital-labor aggregate and energy is less than unity, which implies that when energy services are scarce they strongly constrain output growth resulting in a low income steady-state. When energy services are abundant the economy exhibits the behavior of the "modern growth regime" with the Solow model as a limiting case. The expansion of energy services is found to be a major factor in explaining economic growth in Sweden, especially before the second half of the 20th century. After 1950, labor-augmenting technological change becomes the dominant factor driving growth though energy still plays a role. Keywords: Unified growth theory, Energy, Industrial Revolution, Economic growth

Is There Really Granger Causality Between Energy Use and Output?

Stephan B. Bruns, Christian Gross and David I. Stern

Year: 2014
Volume: Volume 35
Number: Number 4
DOI: 10.5547/01956574.35.4.5
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We carry out a meta-analysis of the very large literature on testing for Granger causality between energy use and economic output to determine if there is a genuine effect in this literature or whether the large number of apparently significant results is due to publication or misspecification bias. Our model extends the standard meta-regression model for detecting genuine effects in the presence of publication biases using the statistical power trace by controlling for the tendency to over-fit vector autoregression models in small samples. Granger causality tests in these over-fitted models have inflated type I errors. We cannot find a genuine causal effect in the literature as a whole. However, there is a robust genuine effect from output to energy use when energy prices are controlled for.

Energy and Economic Growth: The Stylized Facts

Zsuzsanna Csereklyei, M. d. Mar Rubio-Varas, and David I. Stern

Year: 2016
Volume: Volume 37
Number: Number 2
DOI: 10.5547/01956574.37.2.zcse
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We summarize what we know about energy and economic growth in a set of stylized facts. We combine analysis of a panel data set of 99 countries from 1971 to 2010 with analysis of some longer run historical data. Our key result is that over the last 40 years there has been a stable cross-sectional relationship between per capita energy use and income per capita with an elasticity of energy use with respect to income of less than unity. This implies that energy intensity has tended to decrease in countries that have become richer but not in others. We also find that over the last two centuries there has been convergence in energy intensity towards the current distribution, per capita energy use has tended to rise and energy quality to increase, and, though evidence is limited, the cost share of energy has declined.

Technology Choices in the U.S. Electricity Industry before and after Market Restructuring

Zsuzsanna Csereklyei and David I. Stern

Year: 2018
Volume: Volume 39
Number: Number 5
DOI: 10.5547/01956574.39.5.zcse
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We study the drivers of the adoption of electricity generation technologies between 1970 and 2014 in the lower 48 U.S. states. Since the 1990s, major electricity market restructuring took place in some parts of the United States. We explore the implications of changing from a regulated "cost-of-service", or rate of return, system to liberalized wholesale electricity markets on technology and fuel choices. We find that wholesale market restructuring resulted in significant immediate investment in various natural gas technologies due to higher expected profits, and a reduction in coal investments. In states that adopted liberalized wholesale electricity markets, higher natural gas price expectations resulted in more investment in coal and renewable technologies, while higher coal price expectations resulted in lower coal-fired baseload power investments. Natural gas price expectations, therefore, have the potential to significantly shape the power generation landscape of the future.Keywords: Technology choices, Electricity industry, Market restructuring

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