The Effect of Variable Elasticity of Substitution Between Energy and Capital on Economic Growth

Öz

In this research, the effect of elasticity of substitution between energy and capital to economic growth was analyzed by using the data of 58 countries from the years 1975-2017. For the elasticity calculations, nested VES production function is estimated through non-linear Least Square regression method and is analyzed within the scope of Solow growth model. Analysis findings indicates that instead of a substitution relationship, there is a complementary relationship between energy and capital. Complementary relationship indicates the following; a conjunct increase of capital stock and energy consumption is necessary in order to achieve the capital accumulation and sustainable long-run economic growth. To this end, estimation findings are of vital importance in terms of attaining sustainable economic growth and economic policies that are being implemented with a view of mitigating energy consumption.

Anahtar Kelimeler

• Economic Growth
• Energy Consumption
• Elasticty of Substitution
• VES Production Function

Enerji- SermayeArasındaki Değişken İkame Esnekliğinin Ekonomik Büyümeye Etkisi

Öz

Bu araştırmada, 58 ülkenin 1975-2017 yıllarına ait verileri kullanılarak enerji ve sermaye arasındaki ikama esnekliğinin ekonomik büyümeye olan etkisi incelenmiştir. İkame esnekliği hesaplamaları için iç içe geçmiş VES üretim fonksiyonu doğrusal olmayan En Küçük Kareler regresyon yöntemi ile tahmin edilerek Solow büyüme modeli çerçevesinde analiz edilmiştir. Analiz bulguları, enerji ile sermaye arasında ikame ilişkisinin değil tamamlayıcılık ilişkisinin olduğunu göstermektedir. Tamamlayıcılık ilişkisi şunu göstermektedir; sermaye birikiminin sağlanabilmesi ve dolayısıyla uzun dönemli ekonomik büyümenin sürdürülebilmesi için sermaye stokunun ve enerji tüketiminin birlikte artırılması gerekmektedir. Bu açıdan elde edilen tahmin sonuçları, sürdürülebilir ekonomik büyümeyi sağlamak ve aynı zamanda enerji tüketimini azaltmak üzere uygulanan iktisadi politikalar için büyük önem arz etmektedir.

Anahtar Kelimeler

• Ekonomik Büyüme
• Enerji Tüketimi
• İkame Esnekliği
• VES Üretim Fonksiyonu

Kaynakça

1. Altunç, Ö. F., & Yildirim, A. (2020). Capital-energy substitution: Does energy sources matter for the elasticity of substitution?. An Empirical Investigation for OECD Countries, Siyasal: Journal of Political Sciences, 29(2): 367-378.
2. Arrow, K. J., Chenery, H. B., Minhas, B. S., & Solow, R. M. (1961). Capital-labor substitution and economic efficiency. The Review of Economics and Statistics, 43(3), 225–250, https://doi.org/10.2307/1927286.
3. Aydin, C., & Esen, Ö. (2018). Does the level of energy intensity matter in the effect of energy consumption on the growth of transition economies? Evidence from dynamic panel threshold analysis. Energy Economics, 69, 185-195. https://doi.org/10.1016/j.eneco.2017.11.010
4. Bairam, E. (1989). Learning-by-doing, variable elasticity of substitution and economic growth in japan, 1878–1939. The Journal of Development Studies, 25(3), 344-353.
5. BP Statistics (2020). Statistical review of world energy 2020- 69th edition. (Erişim: 01.02.2021), https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html.
6. Brockway, P. E., Heun, M. K., Santos, J., & Barrett, J. R. (2017). Energy-extended ces aggregate production: Current aspects of their specification and econometric estimation. Energies, 10(2): 202.
7. Bronfenbrenner, M., & Douglas, P. H. (1939). Cross-section studies in the Cobb-Douglas function. Journal of Political Economy, 47(6): 761-785.
8. Chichilnisky, G., & Heal, G. M. (1983). Energy-capital substitution: a general equilibrium analysis. IIASA Collaborative Paper CP, International Institute for Applied Systems Analysis, 83-6.

9. Cobb, C. W., & Douglas, P. H. (1928). A theory of production. The American Economic Review, 18 (1): 139-165.
10. Daniels, G., & Kakar, V. (2017). Economic growth and the CES production function with human capital. Economics Bulletin, 37(2): 930-951.
11. Esen, O., & Bayrak, M. (2017). Does more energy consumption support economic growth in net energy-ımporting countries?. Journal of Economics, Finance and Administrative Science, 22(42), 75-98.
12. Esen, Ö. (2016). Security of the energy supply in Turkey: Prospects, challenges and opportunities. International Journal of Energy Economics and Policy, 6(2), 281-289.
13. Feenstra, Robert C., Robert I., & Marcel, P. T. (2015). The next generation of the Penn World Table. American Economic Review, 105(10): 3150-3182, available for download at www.ggdc.net/pwt.
14. Fiorito, G., & van den Bergh, J. C. (2016). Capital-energy substitution in manufacturing for seven OECD countries: learning about potential effects of climate policy and peak oil. Energy Efficiency, 9(1): 49-65.
15. Gunn, G. T., & Douglas, P. H. (1941). The production function for American manufacturing in 1919, The American Economic Review, 31(1): 67-80.
16. Karagiannis, G., Theodore P., & Chris, P. (2005). Variable elasticity of substitution and economic growth: Theory and evidence. In New Trends in Macroeconomics, ed. Claude Diebolt and Catherine Kyrtsou: 21–37.
17. Kemfert, C. (1998). Estimated substitution elasticities of a nested CES production function approach for Germany. Energy Economics, 20(3): 249-264.
18. Kim, J., & Heo, E. (2013). Asymmetric substitutability between energy and capital: Evidence from the manufacturing sectors in 10 OECD countries. Energy Economics, 40: 81-89.
19. Klump, R., & de La Grandville, O. (2000). Economic growth and the elasticity of substitution: Two theorems and some suggestions. American Economic Review, 90(1): 282–291.
20. Lazkano, I., & Pham, L. (2016). Can capital-energy substitution foster economic growth?. Land Economics, 92(3): 491-514.
21. Mallick, D. (2012). The role of the elasticity of substitution in economic growth: A cross-country investigation. Labour Economics, 19(5): 682-694.
22. Revankar, N. S. (1971a). A class of variable elasticity of substitution production functions. Econometrica, 39(1): 61–71.
23. Revankar, N. S. (1971b). Capital-labor substitution, technological change and economic growth: The U.S. experience, 1929-1953. Metroeconomica, 23(2): 154–176. https://doi.org/10.1111/j.1467-999X.1971.tb00168.x
24. Sato, R., & Hoffman, R. F. (1968). Production functions with variable elasticity of factor substitution: Some analysis and testing. The Review of Economics and Statistics, 50 (4): 453–460. https://doi.org/10.2307/1926813.
25. Shen, K., & Whalley, J. (2017). Capital–labor–energy substitution in nested CES production functions for China. The Economies of China and India, 2: 15-27.
26. Smith, V. E. (1945). Nonlinearity in the relation between input and output: the Canadian automobile industry, 1918-1930. Econometrica, 13(3): 260-272.
27. Stern, D. I. (2010). The role of energy in economic growth. Working paper. Centre for Climate Economics and Policy, Crawford School of Public Policy, Australian National University, Acton.
28. Tallman, E. W., & Wang, P. (1994). Human capital and endogenous growth evidence from Taiwan. Journal of Monetary Economics, 34(1): 101–124. https://doi.org/10.1016/0304-3932(94)01152-4.
29. Van der Werf, E. (2008). Production functions for climate policy modeling: an empirical analysis. Energy Economics, 30(6): 2964-2979.