Abstract
This chapter outlines the background of the problem, along with presenting the relevant theories and existing researches related to the analysis of the productivity growth. The development of factor demand models is explained in detail based on the framework of the theory of firm’s optimal input decisions in a non-static context.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Bibliography
Aigner, D. J., Lovell, C. A. K., & Schmidt, P. (1977). Formulation and estimation of stochastic production function models. Journal of Econometrics, 6(1), 21–37.
Ang, B. W., & Lee, S. Y. (1994). Decomposition of industrial energy-consumption—some methodological and application issues. Energy Economics, 16(2), 83–92. doi:10.1016/0140-9883(94)90001-9
Arnberg, S., & Bjorner, T. B. (2007). Substitution between energy, capital and labour within industrial companies: A micro panel data analysis. Resource and Energy Economics, 29(2), 122–136. doi:10.1016/j.reseneeco.2006.01.001
Apostolakis, B. E. (1990). Energy-capital substitutability/complementarity. Energy Economics, 12(1), 48–58. doi:10.1016/0140-9883(90)90007-3
Atkson, A., & Kehoe, P. J. (1995). Putty-clay capital and energy (Working Paper No. 548). Retrieved from The Federal Reserve Bank of Minneapolis website: http://www.minneapolisfed.org/research/WP/WP548.pdf
Balk, B. M. (2001). Scale efficiency and productivity change. Journal of Productivity Analysis, 15(3), 159–183. doi:10.1023/A:1011117324278
Battese, G. E., & Coelli, T. J. (1995). A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics, 20(2), 325–332. doi:10.1007/bf01205442
Battese, G. E., Heshmati, A., & Hjalmarsson, L. (2000). Efficiency of labour use in the Swedish banking industry: a stochastic frontier approach. Empirical Economics, 25(4), 623–640. doi:10.1007/s001810000037
Berndt, E. R., & Morrison, C. J. (1981). Dynamic models of energy demand: An assessment and comparison. In E. R. Berndt & B. C. Field (Eds.), Modeling and measuring natural resource substitution: Revisions of papers originally presented at a conference held in Key Biscayne, Florida. Massachusetts. Cambridge: MIT Press.
Berndt, E. R., Morrison, C. J., & Watkins, G. C. (1981). Dynamic models of energy demand: An assessment and comparision. In E. R. Berndt & B. C. Field (Eds.), Modeling and measuring national resource substitution. Cambridge, MA: MIT Press.
Berndt, E. R., & Wood, D. O. (1975). Technology, prices, and the derived demand for energy. The Review of Economics and Statistics, 57(3), 259–268.
Berndt, E. R., & Wood, D. O. (1979). Engineering and econometric interpretations of energy-capital complementarity. American Economic Review, 69(3), 342–354.
Bertola, G. (1998). Irreversible investment. Research in Economics, 52(1), 3–37.
Bhattacharyya, S. C., & Timilsina, G. R. (2009). Energy demand models for policy formulation: A comparative study of energy demand models (Policy Research Working Paper WPS4866). World Bank. Retrieved from http://econ.worldbank.org/external/default/main?pagePK=64165259&theSitePK=469372&piPK=64165421&menuPK=64166093&entityID=000158349_20090317093816
Chambers, R. G. (1983). Scale and productivity measurement under risk. American Economic Review, 73(4), 802–805. doi:10.2307/1816579
Chang, C.-C., & Luh, Y.-H. (1999). Efficiency change and growth in productivity: The Asian growth experience. Journal of Asian Economics, 10(4), 551–570. doi:10.1016/s1049-0078(00)00032-4
Chen, P. C., Yu, M. M., Chang, C. C., & Hsu, S. H. (2008). Total factor productivity growth in China’s agricultural sector. China Economic Review, 19(4), 580–593. doi:10.1016/j.chieco.2008.07.001
Chichilnisky, G., & Heal, G. M. (1993). Energy-capital substitution: a general equilibrium analysis. In G. M. Heal (Ed.), Critical Writings in the Economics of Exhaustible Resources (pp. 339–390). London: Edward Elgar.
Christensen, L. R., Jorgenson, D. W., & Lau, L. J. (1973). Transcendental logarithmic production frontiers. Review of Economics and Statistics, 55(1), 28–45. doi:10.2307/1927992
Christopoulos, D. K. (2000). The demand for energy in Greek manufacturing. Energy Economics, 22(5), 569–586. doi:10.1016/S0140-9883(99)00041-9
Collins, S. M., & Bosworth, B. P. (1996). Economic growth in East Asia: Accumulation versus assimilation. Brookings Papers on Economic Activity, 2(2), 135–203.
Conrad, K., & Unger, R. (1987). Ex post tests for short-and long-run optimization. Journal of Econometrics, 36(3), 339–358. doi:10.1016/0304-4076(87)90006-6
Cook, P., & Uchida, Y. (2002). Productivity growth in east Asia: A reappraisal. Applied Economics, 34(10), 1195–1207. doi:10.1080/00036840110095778
Denny, M., May, J. D., & Pinto, C. (1978). The demand for energy in Canadian manufacturing: Prologue to an energy policy. The Canadian Journal of Economics, 11(2), 300. doi:10.2307/134350
Diewert, W. E. (1971). An application of the shephard duality theorem: A generalized leontief production function. Journal of Political Economy, 79(3), 481–507. doi:10.2307/1830768
Diewert, W. E. (1974). Functional forms for revenue and factor requirements functions. International Economic Review, 15(1), 119. doi:10.2307/2526093
Diewert, W. E., & Wales, T. J. (1987). Flexible functional forms and global curvature conditions. Econometrica, 55(1), 43–68. doi:10.2307/1911156
Dougherty, C. (2007). Introduction to econometrics. New York: USA: Oxford University Press.
Eisner, R., Strotz, R. H., & Post, G. R. (1963). Determinants of business investment. Englewood Cliffs, NJ, USA: Prentice-Hall.
Epstein, L. G. (1981). Duality-theory and functional forms for dynamic factor demands. Review of Economic Studies, 48(1), 81–95. doi:10.2307/2297122
Färe, R., Grosskopf, S., & Lee, W. F. (1995). Productivity in Taiwanese manufacturing industries. Applied Economics, 27(3), 259–265. doi:10.1080/00036849500000109
Färe, R., Grosskopf, S., & Lee, W. F. (2001). Productivity and technical change: The case of Taiwan. Applied Economics, 33(15), 1911–1925. doi:10.1080/00036840010018711
Färe, R., Grosskopf, S., Norris, M., & Zhang, Z. (1994). Productivity growth, technical progress, and efficiency change in industrialized countries. The American Economic Review, 84(1), 66–83. doi:10.2307/2117971
Field, B. C., & Grebenstein, C. (1980). Capital-energy substitution in U.S. manufacturing. The Review of Economics and Statistics, 62(2), 207. doi:10.2307/1924746
Filippini, M., & Hunt, L. C. (2011). Energy demand and energy efficiency in the OECD countries: A stochastic demand frontier approach. Energy Journal, 32(2), 59–80.
Freeman, C., & Soete, L. L. (1997). The economics of industrial innovation: Psychology Press.
Frondel, M., & Schmidt, C. M. (2002). The capital-energy controversy: An artifact of cost shares? Energy, 23(3), 53–79.
Galeotti, M. (1990). Specification of the technology for neoclassical investment theory—Esting the adjustment costs approach. Review of Economics and Statistics, 72(3), 471–480. doi:10.2307/2109355
Galeotti, M. (1996). The intertemporal dimension of neoclassical production theory. Journal of Economic Surveys, 10(4), 421–460. doi:10.1111/j.1467-6419.1996.tb00019.x
Griffin, J. M., & Gregory, P. R. (1976). An intercountry translog model of energy substitution responses. The American Economic Review, 66(5), 845–857. doi:10.2307/1827496
Grossman, G. M., & Helpman, E. (1991). Innovation and growth in the global economy. Cambridge, MA: The MIT Press.
Groth, C. (2005). Estimating UK capital adjustment costs (Working Paper 258). Bank of England. Structural Economic Analysis Division. Retrieved from http://www.bankofengland.co.uk/publications/Documents/workingpapers/wp258.pdf
Harper, C., & Field, B. C. (1983). Energy substitution in U.S. manufacturing: A regional approach. Southern Economic Journal, 50(2), 385. doi:10.2307/1058213
Hazilla, M., & Kopp, R. A. Y. M. O. N. D. (1983). Substitution Between Energy and Other Factors of Production: US Industrial Experience 1958–74. Final Report RP-1475, Electric Power Research Institute, Palo Alto, California
Hsiao, F. S. T., & Park, C. (2005). Korean and Taiwanese productivity performance: Comparisons at matched manufacturing levels. Journal of Productivity Analysis, 23(1), 85–107. doi:10.1007/s11123-004-8549-x
Hudson, E. A., & Jorgenson, D. W. (1974). U.S. energy policy and economic growth, 1975–2000. The Bell Journal of Economics and Management Science, 5(2), 461. doi:10.2307/3003118
Hunt, L. C. (1984). Energy and capital—Substitutes or complements—Some results for the UK industrial sector. Applied Economics, 16(5), 783–789. doi:10.1080/00036848400000027
Iqbal, M. (1986). Substitution of labour, capital and energy in the manufacturing sector of Pakistan. Empirical Economics, 11(2), 81–95. doi:10.1007/bf01987506
Ishida, H. (2014). The effect of ICT development on economic growth and energy consumption in Japan. Telematics and Informatics, Forthcoming(0). doi:http://dx.doi.org/10.1016/j.tele.2014.04.003
Jondrow, J., Lovell, C. A. K., Materov, I. S., & Schmidt, P. (1982). On the estimation of technical inefficiency in the stochastic frontier production function model. Journal of Econometrics, 19(2–3), 233–238. doi:10.1016/0304-4076(82)90004-5
Jones, C. T. (1995). A dynamic analysis of interfuel substitution in U.S. industrial energy demand. Journal of Business & Economic Statistics, 13(4), 459. doi:10.2307/1392391
Jorgenson, D. W. (1963). Capital theory and investment behaviour. American Economic Review, 35(2), 247–259.
Just, R. E., & Pope, R. D. (1978). Stochastic specification of production functions and economic implications. Journal of Econometrics, 7(1), 67–86. doi:10.1016/0304-4076(78)90006-4
Kander, A., & Schön, L. (2007). The energy-capital relation—Sweden 1870–2000. Structural Change and Economic Dynamics, 18(3), 291–305. doi:10.1016/j.strueco.2007.02.002
Kemfert, C., & Welsch, H. (2000). Energy-capital-labor substitution and the economic effects of CO2 abatement: Evidence for Germany. Journal of Policy Modeling, 22(6), 641–660. doi:10.1016/S0161-8938(98)00036-2
Khayyat, N. T. (2013). Exploring demand for energy in the South Korean industries (Doctoral dissertation), SMC University, Zurich, Switzerland. Retrieved from http://www.smcuniversity.com/item/exploring-demand-for-energy-in-the-south-korean-industries.html.
Kim, B. C., & Labys, W. C. (1988). Application of the translog model of energy substitution to developing-countries—The case of Korea. Energy Economics, 10(4), 313–323. doi:10.1016/0140-9883(88)90043-6
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. doi:10.1016/j.eneco.2013.06.014
Kim, T., & Park, C. (2006). Productivity growth in Korea: Efficiency improvement or technical progress? Applied Economics, 38(8), 943–954. doi:10.1080/00036840600639006
Koetse, M. J., de Groot, H. L. F., & Florax, R. J. G. M. (2008). Capital-energy substitution and shifts in factor demand: A meta-analysis. Energy Economics, 30(5), 2236–2251. doi:10.1016/j.eneco.2007.06.006
Koschel, H. (2000). Substitution elasticities between capital, labour, material, electricity and fossil fuels in German producing and service sectors (Discussion Papers 00–31). Mannheim. Retrieved from http://www.zew.de/en/publikationen/publikation.php3?action=detail&nr=435.
Kruger, J. J., Canter, U., & Hanusch, H. (2000). Total factor productivity, the east asian miracle, and the world production frontier. Weltwirtschaftliches Archiv, 136(1), 111–136.
Krugman, P. (1994). The myth of Asia’s miracle. Foreign Affairs, 73(1), 62–78.
Kulatilaka, N. (1985). Capital budgeting and optimal timing of investments in flexible manufacturing systems. Annals of Operations Research, 3(2), 35–57. doi:10.1007/BF02022058
Kumbhakar, S. C., Hjalmarsson, L., & Heshmati, A. (2002). How fast do banks adjust? A dynamic model of labour-use with an application to Swedish banks. Journal of Productivity Analysis, 18(1), 79–102.
Kumbhakar, S. C., & Lovell, C. A. K. (2000). Stochastic frontier analysis. Cambridge: U. K.
Lau, L. J. (1986). Functional forms in econometric model building. In G. Zvi & D. I. Michael (Eds.), Handbook of Econometrics (Vol. 3, pp. 1515–1566): Elsevier.
Lee, J.-D., Kim, T.-Y., & Heo, E. (1998). Technological progress versus efficiency gain in manufacturing sectors. Review of Development Economics, 2(3), 268–281. doi:10.1111/1467-9361.00041
Lucas, R. E., (1967). Adjustment costs and the theory of supply. The Journal of Political Economy, 75(4), 321–334.
Lucas, R. E., Jr. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42. doi:10.1016/0304-3932(88)90168-7
Ma, H., Oxley, L., Gibson, J., & Kim, B. (2008). China’s energy economy: Technical change, factor demand and interfactor/interfuel substitution. Energy Economics, 30(5), 2167–2183.
Magnus, J. R. (1979). Substitution between energy and nonenergy inputs in the Netherlands. International Economic Review 465483, 20(2 SRC–Google Scholar), 1950–1976.
Mahmud, S. F. (2000). The energy demand in the manufacturing sector of Pakistan: some further results. Energy Economics, 22(6), 641–648. doi:10.1016/S0140-9883(99)00031-6
Masso, J., & Heshmati, A. (2004). The optimality and overuse of labour in Estonian manufacturing enterprises. Economics of Transition, 12(4), 683–720. doi:10.1111/j.0967-0750.2004.00199.x
McFadden, D. (1978). Modelling the choice of residential location. California: Institute of Transportation Studies, University of California.
McNown, R. F., Pourgerami, A., & Hirschhausen, C. R. (1991). Input substitution in manufacturing for three LDCs: Translog estimates and policy implications. Applied Economics, 23(1), 209–218.
Morana, C. (2007). Factor demand modelling: The theory and the practice. Applied Mathematical Sciences, 1(31), 1519–1549.
Morrison, C. J. (1988). Quasi-fixed inputs in US and Japanese manufacturing A generalized Leontief restricted cost function approach. The Review of Economics and Statistics, 70(2), 275–287.
Mun, S. B. (2002, August, 30, 2013). Computer adjustment costs: Is quality improvement important? Retrieved from http://homepages.nyu.edu/~sbm210/research/itjq.pdf.
Nadiri, M. I., & Prucha, I. R. (1986). A comparison of alternative methods for the estimation of dynamic factor demand models under non-static expectations. Journal of Econometrics, 33(1), 187–211.
Nadiri, M. I., & Prucha, I. R. (1999). Dynamic factor demand models and productivity analysis (NBER Working Paper 7079). National Bureau of Economic Research Working Paper Series. Retrieved from http://www.nber.org/papers/w7079.pdf.
Nadiri, M. I., & Rosen, S. (1969). Interrelated factor demand functions. The American Economic Review, 59(4), 457–471.
Nelson, R. R., & Pack, H. (1999). The Asian miracle and modern growth theory. The Economic Journal, 109(457), 416–436. doi:10.1111/1468-0297.00455
Ozatalay, S., Grubaugh, S., & Long, T. V. (1979). Energy substitution and national energy-policy. American Economic Review, 69(2), 369–371.
Pindyck, R. S. (1979). Interfuel substitution and the industrial demand for energy: An international comparison. The Review of Economics and Statistics, 61(2), 169–179.
Pindyck, R. S., & Rotemberg, J. J. (1983). Dynamic factor demands and the effects of energy price shocks. American Economic Review, 73(5), 1066–1079.
Rouvinen, P. (1999). R&D spillovers among Finnish manufacturing firms: A cost function estimation with random coeficients. Discussion Papers no. 686. The Research Institute of the Finnish Economy.
Sahu, S. K., & Narayanan, K. (2011). Total factor productivity and energy intensity in Indian manufacturing : A cross-sectional study. International Journal of Energy Economics and Policy, 1(2) (SRC-GoogleScholar), 47–58.
Saicheua, S. (1987). Input substitution in Thailand’s manufacturing sector: Implications for energy policy. Energy Economics, 9(1), 55–63.
Schankerman, M., & Nadiri, M. I. (1982). Investment in R&D, costs of adjustment and expectations. National Bureau of Economic Research Working Paper Series no 931.
Shephard, R. W. (1953). Cost and production functions. Princeton: USA: Princeton University Press.
Siddayao, C. M., Khaled, M., Ranada, J. G., & Saicheua, S. (1987). Estimates of energy and non-energy elasticities in selected Asian manufacturing sectors: Policy implications. Energy Economics, 9(2), 115–128.
Stiglitz, J. E. (1996). Some lessons from the east asian miracle. The World Bank Research Observer, 11(2), 151–177. doi:10.2307/3986429
Stern, D. I. (2011). The role of energy in economic growth. Annals of the New York Academy of Sciences, 1219(1), 26–51.
Suzuki, K., & Takenaka, H. (1981). The role of investment for energy conservation: Future Japanese economic growth. Energy Economics, 3(4), 233–243. doi:10.1016/0140-9883(81)90024-4
Taskin, F., & Zaim, O. (1997). Catching-up and innovation in high- and low-income countries. Economics Letters, 54(1), 93–100. doi:10.1016/S0165-1765(97)00004-9
Thompson, H. (2006). The applied theory of energy substitution in production. Energy Economics, 28(4), 410–425. doi:10.1016/j.eneco.2005.01.005
Turnovsky, M. H. L., Folie, M., & Ulph, A. (1982). Factor substitutability in Australian manufacturing with emphasis on energy inputs. Economic Record, 58(160), 61–72. doi:10.1111/j.1475-4932.1982.tb00349.x
Urga, G., & Walters, C. (2003). Dynamic translog and linear logit models: A factor demand analysis of interfuel substitution in US industrial energy demand. Energy Economics, 25(1), 1–21. doi:10.1016/S0140-9883(02)00022-1
Varian, H. R. (1992). Macroeconomic analysis (3rd ed.). New York, USA: W.W. Norton & Company, Inc.
Vencappa, D., Fenn, P., Diacon, S., & Campus, J. (2008, July, 3, 2013). Parametric decomposition of total factor productivity growth in the European Insurance Industry: evidence from life and non-life companies (Working Paper).Nottingham University. Retrieved from http://scholar.googleusercontent.com/scholar?q=cache:cudL8xyk8vkJ:scholar.google.com/+Parametric+Decomposition+of+Total+Factor+Productivity+Growth+in+the+European+Insurance+Industry:+Evidence+from+Life+and+Non-Life+Companies&hl=en&as_sdt=0,5.
Watanabe, C. (1992). Trends in the substitution of production factors to technology - empirical-analysis of the inducing impact of the energy-crisis on Japanese industrial-technology. Research Policy, 21(6), 481–505. doi:10.1016/0048-7333(92)90006-P
Yi, F. (2000). Dynamic energy-demand models: A comparison. Energy Economics, 22(2), 285–297. doi:10.1016/S0140-9883(99)00042-0
Yuhn, K. H. (1991). Economic growth, technical change biases, and the elasticity of substitution: A test of the De La Grandville hypothesis. The Review of Economics and Statistics, 73(2), 340–346.
Zhou, P., Ang, B. W., & Zhou, D. Q. (2012). Measuring economy-wide energy efficiency performance: A parametric frontier approach. Applied Energy, 90(1), 196–200. doi:10.1016/j.apenergy.2011.02.025
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2017 Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Khayyat, N.T. (2017). The Factor Demand Model and the Theory of Productivity. In: ICT Investment for Energy Use in the Industrial Sectors. Lecture Notes in Energy, vol 59. Springer, Singapore. https://doi.org/10.1007/978-981-10-4756-5_4
Download citation
DOI: https://doi.org/10.1007/978-981-10-4756-5_4
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-10-4755-8
Online ISBN: 978-981-10-4756-5
eBook Packages: EnergyEnergy (R0)