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A Comparison of Multivariate Logit and Translog Models for Energy and Nonenergy Input Cost Share Analysis

Thomas J. Lutton and Michael R. LeBlanc

Year: 1984
Volume: Volume 5
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol5-No4-3
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Abstract:
With the advent of the translogarithmic (translog) cost function has come greater interest in estimating systems of input share equations (Christensen and Greene, 1976; Berndt and Wood, 1975). A distinguishing feature of the translog cost function is that optimal input shares are linear in parameters. The linearity arises from the second-order approximation and facilitates estimation of the share system. Linearity, however may result in negative fitted shares if error terms are assumed to be additive and normally distributed. Woodland (1979) demonstrated that maximum likelihood estimators with an underlying Dirichlet distribution constrain fitted shares to be inside the zero-one interval for the sample. However, it is possible to obtain shares outside the zero-one interval when the model is used for forecasting. Moreover, there is no theoretical reason why input shares should be monotonic in input prices. If a third-order Taylor series expansion is assumed, the monotonicity restriction can be relaxed, but such an assumption sacrifices the principle of parametric parsimony (Fuss et al., 1978).



Customer Responsiveness to Real-Time Pricing of Electricity

Jay Zarnikau

Year: 1990
Volume: Volume 11
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No4-6
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Abstract:
The success of real-time pricing efforts will depend in large part upon the extent to which electricity consumers are able to alter their consumption patterns in response to the prices quoted by the utility. This article provides some original estimates of hourly price elasticity responses to real-time prices by large industrial energy consumers.



Energy Substitutability in Canadian Manufacturing Econometric Estimation with Bootstrap Confidence Intervals

Yazid Dissou and Reza Ghazal

Year: 2010
Volume: Volume 31
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No1-6
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Abstract:
This study provides estimates of the price and Morishima substitution elasticities between energy and non-energy inputs in two Canadian energy-intensive manufacturing industries: Primary Metal and Cement. The elasticities are estimated using annual industry-level KLEM data (1961-2003) and relying on two flexible functional forms: the Translog and the Symmetric Generalized McFadden (SGM) cost functions. In addition to the point estimates, the confidence intervals of the elasticities are computed using Studentized bootstrap resampling techniques. For both industries, the estimation results suggest that capital, labour, material and energy are pairwise substitutes and that energy is the most substitutable input. However, the low magnitudes of the estimated elasticities do not seem to offer great flex





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