A new approach for assessing the macroeconomic growth energy rebound effect

Abstract

Our paper presents a new approach to estimating the macroeconomic growth energy rebound effect. Utilizing data envelopment analysis, our suggested methodology, unlike the standard macroeconomic growth rebound effect estimation, considers other factors of production. Through an output-oriented data envelopment analysis, optimal economic growth is derived considering all factors of production. The difference between the optimal economic growth and actual economic growth represents information on energy overspending. This overspent energy directly equates to the macroeconomic growth energy rebound effect. For the empirical case study, time-series data of economic growth and factors of production, demonstrated by energy supply, capital stocks, and labor force, are collected for the period of 1971 to 2012 in Korea. While the energy rebound effect results using the standard approach to estimating macroeconomic growth energy rebound effect are in the vicinity of 100%, our empirical results show that there is a 1% rebound effect in most of the years. Our method is plausible since our results show that the energy rebound effect is high when the economy is in recession or energy prices are shocked. That is, energy, one of the factors of production, is wasted from an economic viewpoint, which is consistent with the definition of energy rebound effect.