Abstract
A factor proportions model examines the effects of falling energy input and its rising price in the US economy based on a novel production function motivated by the definition of physical work. This physical production function specifies separate interaction of energy and labor with capital, estimated with annual data from 1951 to 2008. Energy has a large output elasticity and inelastic own input demand. A rising energy price lowers the return to capital in the general equilibrium even though capital is a moderate substitute for energy. Energy has robust comparative static elasticities linked to manufacturing in the general equilibrium.
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