Directed technological change, energy and more: a modern story

Zheng Hou,Joaquim J.S Ramalho,Catarina Roseta-Palma

doi:10.1017/s1355770x2000008x

Zheng Hou, Joaquim J.S Ramalho + Show 1 more

Open Access

https://doi.org/10.1017/s1355770x2000008x

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Abstract

AbstractReliance of modern economic activities on the use of energy, most of which still comes from non-renewable sources, provokes concerns regarding the most efficient utilization of energy inputs in production. While most theory expects directed technological change to be biased towards the non-renewable input, there is rare macro-level evidence that technological change is actually biased towards energy rather than other main inputs. To fill this gap, we apply stochastic frontier analysis to country data regarding output produced with capital, labor and energy, and estimate a set of indicators for technological change. Findings show that technological change is biased the most towards energy in general. In particular, although different groups of countries exhibit various patterns, there is strong evidence that technological change favors energy more than labor. This is in line with the theoretical expectation that technological change ought to be biased towards the non-renewable input rather than the renewable ones.

Highlights

Energy is, to the modern economy, what blood is to the body
There is intersection in the con...dence intervals of the output elasticity of labor and that of energy, if we look at Table 5, we can ...nd that the bias index E-L is statistically signi...cant and positive in most time periods, implying that technological change is biased towards energy rather than labor
In this paper we apply the Stochastic Frontier Analysis to data for 16 countries in order to assess the technological change in production at macro level with three input factors: capital, labor and energy

Summary

Introduction

To the modern economy, what blood is to the body. In the past few decades, fossil energy dependency has declined, it still constitutes a major part of the world’s energy consumption. Consensus has long been reached by economists that technological progress is the key to a sustainable economic growth that relies on the use of a limited stock of resources. Policy makers shall be aware of this, the implementation of policies is never a simple procedure that can fully reach its goal, and we cannot be so sure whether technological change is biased towards energy rather than other input factors. Empirical work on the direction of technological change involving energy input has been arousing the interest of energy and environmental economists for years, including Karan...l and Yeddir-Tamsamani (2010), Shao et al (2016), Zha et al (2017), among others. Evidence for the macro level is still rare; in this paper, we try to draw a picture on the situation of directed technological change of the world’s main economies

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