Open AccessTrends in Factor Price Elasticities Adding Energy to Capital and Labor in the US Economy
Author(s) -
Henry Thompson
Publication year - 2019
Publication title -
review of economic analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.101
H-Index - 1
ISSN - 1973-3909
DOI - 10.15353/rea.v11i3.1690
Subject(s) - economics , capital (architecture) , econometrics , production function , returns to scale , productivity , production (economics) , total factor productivity , order (exchange) , macroeconomics , history , archaeology , finance
This paper estimates trends in factor price elasticities adding energy Btu input to fixed capital assets and the labor force in annual US data from 1949 to 2013. Second order effects improve estimates of the production function in log differences. The unrestricted estimates test for concavity and constant returns to scale. Adding energy input reduces the apparent productivity of labor and reveals strong capital-labor factor price elasticities with pronounced trends. Energy and labor trend to become weak complements. These trends offer insight into recent economic history and keys to predicting the future as well.