Capital-labour-energy substitution in a nested CES framework: A replication and update of Kemfert (1998)

Publikation: Bidrag til tidsskriftTidsskriftartikelfagfællebedømt

Standard

Capital-labour-energy substitution in a nested CES framework : A replication and update of Kemfert (1998). / Henningsen, Arne; Henningsen, Geraldine; van der Werf , Edwin .

I: Energy Economics, Bind 82, 2019, s. 16-25.

Publikation: Bidrag til tidsskriftTidsskriftartikelfagfællebedømt

Harvard

Henningsen, A, Henningsen, G & van der Werf , E 2019, 'Capital-labour-energy substitution in a nested CES framework: A replication and update of Kemfert (1998)', Energy Economics, bind 82, s. 16-25. https://doi.org/10.1016/j.eneco.2017.12.019

APA

Henningsen, A., Henningsen, G., & van der Werf , E. (2019). Capital-labour-energy substitution in a nested CES framework: A replication and update of Kemfert (1998). Energy Economics, 82, 16-25. https://doi.org/10.1016/j.eneco.2017.12.019

Vancouver

Henningsen A, Henningsen G, van der Werf E. Capital-labour-energy substitution in a nested CES framework: A replication and update of Kemfert (1998). Energy Economics. 2019;82:16-25. https://doi.org/10.1016/j.eneco.2017.12.019

Author

Henningsen, Arne ; Henningsen, Geraldine ; van der Werf , Edwin . / Capital-labour-energy substitution in a nested CES framework : A replication and update of Kemfert (1998). I: Energy Economics. 2019 ; Bind 82. s. 16-25.

Bibtex

@article{c6bbc863c9814d35bc454097a8ef0344,
title = "Capital-labour-energy substitution in a nested CES framework: A replication and update of Kemfert (1998)",
abstract = "The ease with which firms can substitute away from energy to other inputs is an important determining factor in the costs of climate change mitigation policies. Climate policy simulation models usually represent this substitutability by using the Constant Elasticity of Substitution (CES) function with parameter values often taken from econometric studies. Hence, the accuracy of the estimated substitution parameters has a strong influence on the validity of the climate policy simulation. In this article, we attempt to replicate the results presented in a widely cited article in this field: Kemfert (1998) ({\textquoteleft}Estimated substitution elasticities of a nested CES production function approach for Germany{\textquoteright}, Energy Economics, 20, 249–264). We first use the data and software reported in that article and compare our results with those reported in the original study. We then test the same data and a new, more recent, data set on German industrial data with an improved econometric approach. Despite applying various approaches and modifications, we are not able to replicate the results in Kemfert (1998). We furthermore conclude that the data sets that are typically used to estimate nested CES functions often have too few observations and too little independent variation of the explanatory variables to obtain reliable estimates when using a direct non-linear approach.",
author = "Arne Henningsen and Geraldine Henningsen and {van der Werf}, Edwin",
year = "2019",
doi = "10.1016/j.eneco.2017.12.019",
language = "English",
volume = "82",
pages = "16--25",
journal = "Energy Economics",
issn = "0140-9883",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Capital-labour-energy substitution in a nested CES framework

T2 - A replication and update of Kemfert (1998)

AU - Henningsen, Arne

AU - Henningsen, Geraldine

AU - van der Werf , Edwin

PY - 2019

Y1 - 2019

N2 - The ease with which firms can substitute away from energy to other inputs is an important determining factor in the costs of climate change mitigation policies. Climate policy simulation models usually represent this substitutability by using the Constant Elasticity of Substitution (CES) function with parameter values often taken from econometric studies. Hence, the accuracy of the estimated substitution parameters has a strong influence on the validity of the climate policy simulation. In this article, we attempt to replicate the results presented in a widely cited article in this field: Kemfert (1998) (‘Estimated substitution elasticities of a nested CES production function approach for Germany’, Energy Economics, 20, 249–264). We first use the data and software reported in that article and compare our results with those reported in the original study. We then test the same data and a new, more recent, data set on German industrial data with an improved econometric approach. Despite applying various approaches and modifications, we are not able to replicate the results in Kemfert (1998). We furthermore conclude that the data sets that are typically used to estimate nested CES functions often have too few observations and too little independent variation of the explanatory variables to obtain reliable estimates when using a direct non-linear approach.

AB - The ease with which firms can substitute away from energy to other inputs is an important determining factor in the costs of climate change mitigation policies. Climate policy simulation models usually represent this substitutability by using the Constant Elasticity of Substitution (CES) function with parameter values often taken from econometric studies. Hence, the accuracy of the estimated substitution parameters has a strong influence on the validity of the climate policy simulation. In this article, we attempt to replicate the results presented in a widely cited article in this field: Kemfert (1998) (‘Estimated substitution elasticities of a nested CES production function approach for Germany’, Energy Economics, 20, 249–264). We first use the data and software reported in that article and compare our results with those reported in the original study. We then test the same data and a new, more recent, data set on German industrial data with an improved econometric approach. Despite applying various approaches and modifications, we are not able to replicate the results in Kemfert (1998). We furthermore conclude that the data sets that are typically used to estimate nested CES functions often have too few observations and too little independent variation of the explanatory variables to obtain reliable estimates when using a direct non-linear approach.

U2 - 10.1016/j.eneco.2017.12.019

DO - 10.1016/j.eneco.2017.12.019

M3 - Journal article

VL - 82

SP - 16

EP - 25

JO - Energy Economics

JF - Energy Economics

SN - 0140-9883

ER -

ID: 190436437