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Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: An investigation of issues relating to where energy should enter the production function
Authors: Lecca, Patrizio
Swales, J Kim
Turner, Karen
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Keywords: General equilibrium
KLEM production function
Separability assumptions
Issue Date: Nov-2011
Publisher: Elsevier
Citation: Lecca P, Swales JK & Turner K (2011) An investigation of issues relating to where energy should enter the production function, Economic Modelling, 28 (6), pp. 2832-2841.
Abstract: This paper examines the impact of imposing different separability assumptions in the specifications of the standard hierarchical KLEM production function in a computable general equilibrium (CGE) model. The appropriate means of introducing energy to production functions has been a source of debate for a number of years. However, while modellers often subject results to parametric sensitivy analysis regarding the values associated with elasticities of substitution between inputs, it is rarely the case that the structure of the production function is subjected to testing. However, the chosen structure reflects the modeller's view about elasticity between different inputs and will have implications for model results wherever there are changes in relative prices. We illustrate our argument by introducing a simple demand shock to a CGE model of the Scottish economy (targeted at the energy supply sector) under different assumptions regarding the structure of the KLEM production function and separability assumptions therein.
Type: Journal Article
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Rights: Publisher policy allows this work to be made available in this repository. Published in [name of journal] by [insert publisher]. The original publication is available at
Affiliation: University of Strathclyde
University of Strathclyde

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