Abstract
The primary objective of this paper is to explore the possibility of significant regional differences in production functions and the associated elasticities of substitution in a model which includes energy as one of the inputs. As in previous regional production function investigations, broad regional differences in agglomeration economies, technology, product mix, labor quality, and basic regional infrastructure are expected to be manifested in the parameter estimates of production functions.
Highlights
Depending on the complementarity or substitutability of capital (K) and labor (L) for energy (E) in production processes, higher energy prices may result in slower future growth in manufacturing
If the substitution relationships among energy, labor, and capital are different among regions, future growth patterns are likely to vary
Even moderate differences in substitution relationships between capital and energy may be manifested in growth rate differentials
Summary
Depending on the complementarity or substitutability of capital (K) and labor (L) for energy (E) in production processes, higher energy prices may result in slower future growth in manufacturing. The primary objective of this paper is to explore the possibility of significant regional differences in production functions and the associated elasticities ofsubstitution in a model which includes energy as one of the inputs. These studies have been limited to two-input models and have been estimated with restrictive functional forms.
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