Energy Input Interaction in US Output
Keywords:energy interaction; factor productivity; factor price elasticity
This paper estimates production functions for annual US output from 1949 to 2013 adding energy Btu input to fixed capital assets and the labor force. Interactions between inputs are parsimoniously introduced in the error correction estimates. Fixed capital assets successfully imbed technology. Energy and capital are weak substitutes or complements due to their positive interaction. Energy is substantially underpaid relative to its increasing productivity while labor is increasingly overpaid relative to its declining productivity. Factor price elasticities involving labor and the wage are noticeably strong. The nearly elastic own wage effect explains the challenges facing labor.
Copyright (c) 2022 Cassandra Copeland, Henry Thompson
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