Staff Publications

Staff Publications

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    'Staff publications' is the digital repository of Wageningen University & Research

    'Staff publications' contains references to publications authored by Wageningen University staff from 1976 onward.

    Publications authored by the staff of the Research Institutes are available from 1995 onwards.

    Full text documents are added when available. The database is updated daily and currently holds about 240,000 items, of which 72,000 in open access.

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Record number 536531
Title Capital-labour-energy substitution in a nested CES framework : A replication and update of Kemfert (1998)
Author(s) Henningsen, Arne; Henningsen, Geraldine; Werf, Edwin van der
Source Energy Economics (2018). - ISSN 0140-9883
Department(s) Environmental Economics and Natural Resources Group
Publication type Refereed Article in a scientific journal
Publication year 2018
Keyword(s) CES - Climate policy - Elasticity of substitution - Energy - Replication study
Abstract The ease with which firms can substitute away from energy to other inputs is an important determining factor in the costs of climate change mitigation policies. Climate policy simulation models usually represent this substitutability by using the Constant Elasticity of Substitution (CES) function with parameter values often taken from econometric studies. Hence, the accuracy of the estimated substitution parameters has a strong influence on the validity of the climate policy simulation. In this article, we attempt to replicate the results presented in a widely cited article in this field: ('Estimated substitution elasticities of a nested CES production function approach for Germany', Energy Economics, 20, 249-264). We first use the data and software reported in that article and compare our results with those reported in the original study. We then test the same data and a new, more recent, data set on German industrial data with an improved econometric approach. Despite applying various approaches and modifications, we are not able to replicate the results in We furthermore conclude that the data sets that are typically used to estimate nested CES functions often have too few observations and too little independent variation of the explanatory variables to obtain reliable estimates when using a direct non-linear approach.
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