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Path-dependency and input substitution: Implications for energy policy modeling

Kuper,G.H.
; 
van Soest,D.P.
Abstract
In most policy-oriented energy models, the effectiveness of energy policy instruments crucially depends both on the values of the substitution elasticities between the various inputs and on the rates of technological progress. In this paper, we argue that due to the fixed-cost nature of adjustments to relative price changes, these technological parameters are affected by past developments. Failing to account for the role of history will result in biased parameter estimates, and hence the implication for energy policy modelling is that the estimation period should be carefully selected. We provide an empirical illustration using data for the Netherlands.
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Pagination: 10
Date
2003
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Tilburg University Research Output Collection
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Keywords
input substitution, path-dependency, energy policy, O30 - General, Q33 - Resource Booms, Q48 - Government Policy
Citation
Kuper, G H & van Soest, D P 2003, 'Path-dependency and input substitution : Implications for energy policy modeling', Energy Economics, vol. 25, no. 4, pp. 397-407. https://doi.org/10.1016/S0140-9883
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https://hdl.handle.net/20.500.14602/40288
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info:eu-repo/semantics/openAccess
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