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Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Postal Subscription Code 80-978

Front Econ Chin    2009, Vol. 4 Issue (1) : 110-124
research-article |
Industrial energy substitution and a revised Allen elasticity in China
LU Chengjun(), ZHOU Duanming
Department of National Economic Management, School of Economics, Renmin University of China, Beijing 100872, China
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To overcome the drawbacks in estimating the rate of input substitution in existing econometric models, our paper is first to estimate the absolute/net rate of input substitution of capital and labor for energy in China’s industrial sector. Based on trans-log cost function with constant elasticity of substitution and combined MES method with technology progress and output effect, our paper finds a significant substitution relationship between labor and energy and an uncertain substitution relationship between capital and energy with some complementary characteristics. Furthermore, technology progress and output effect are found to have enhanced the substitution of labor for energy in the past 30 years. Based on these empirical findings, constructive suggestions are made concerning the medium and long-term development strategy of energy in China’s industrial sector.

Keywords energy substitution      cross price elasticity      energy strategy     
Corresponding Authors: LU Chengjun,   
Issue Date: 05 March 2009
 Cite this article:   
ZHOU Duanming,LU Chengjun. Industrial energy substitution and a revised Allen elasticity in China[J]. Front Econ Chin, 2009, 4(1): 110-124.
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