Journal
ENERGY POLICY
Volume 39, Issue 8, Pages 4601-4604Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.enpol.2011.04.067
Keywords
Cross-price elasticities; Allen partial elasticities; Morishima elasticities
Funding
- Collaborative Research Center Statistical Modelling of Nonlinear Dynamic Processes of the German Research Foundation (DFG) [SFB 823, A3]
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Estimating the degree of substitution between energy and non-energy inputs is the key for any evaluation of environmental and energy policies. Yet, given the variety of substitution elasticities, the central question arises as to which measure would be most appropriate. Apparently, Allen's elasticities of substitution have been the most-used measures in applied production analysis. In line with Fronde! (2004), this paper argues that cross-price elasticities are preferable for many practical purposes. This conclusion is based on a survey of classical substitution measures, such as those from Allen, Morishima, and McFadden. The survey highlights the fact that cross-price elasticities are their essential ingredients. (C) 2011 Elsevier Ltd. All rights reserved.
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