The Industrial Demand for Energy: A Disaggregated Look
Casler, Stephen Dale
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https://hdl.handle.net/2142/70737
Description
Title
The Industrial Demand for Energy: A Disaggregated Look
Author(s)
Casler, Stephen Dale
Issue Date
1983
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, General
Abstract
Recent energy price shocks have led to interest in the possibilities for energy substitution and the responsiveness of energy demand to price changes. An analytical evaluation of the effects of price changes induced by either energy producers or government policy makers requires parameter values which measure this demand response. Little work has been done in evaluating the effects of changing fuel prices on the demand for fuel inputs by the cross section of individual industries which comprise the U.S. industrial sector. This project is undertaken here.
Measures of the responsiveness of energy demand to price changes include elasticities of demand and substitution. Using energy flow data from the National Energy Accounts these elasticities have been determined through estimation of demand equations derived from an aggregate cost function and use of Shephard's lemma. The disaggregated nature of the data set employed allows estimation of elasticities less likely to be plagued by aggregation bias than studies using more aggregated data.
Generally, results indicate that substitution is the predominant relationship between energy inputs. However, substitution possibilities between energy forms vary widely across industries. Results for a number of industries indicate that underlying assumptions are not valid. As a first approximation, the elasticity estimates determined in this work provide a reference for future analysis and thus represent a starting point in the development of the desired set of industrial elasticity measures.
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