The impact of factor price changes and technological progress on the energy intensity of China's industries: Kalman filter-based econometric method

Abstract

This paper uses the 1981–2012 input-output tables for adopting the translog cost function to construct a Kalman filter-based econometric model to estimate the share equation of energy, non-energy, capital and labor in the 33 China’s sectors and to conduct empirical research on the impact on China’s energy intensity caused by input price changes and biased technological progress. The findings are that between 1981 and 2012, the level of the sectors’ energy intensity was subject to the combined impact of factor prices and biased technology progress. For some sectors, the average Allen-Uzawa elasticity of substitution (AES) for energy to capital or labor rental price was negative. For the 18 sectors, the biased technological progress was from energy savings, while one for the rest from energy consumption. In the 21 sectors, input price changes decreased the sectors’ energy intensity, while 17 of them had the sectors’ energy intensity decreased by technological progress.