A biophysical analysis of the energy/real GDP ratio: implications for substitution and technical change

Abstract This paper quantifies the factors that caused the energy/real GDP ratio to change during the post-war period in France, the Federal Republic of Germany, Japan, and the United Kingdom. Econometric results indicate that changes in the types of fuel used, changes in the energy consumed by the household sector, changes in the types of goods and services produced, and changes in energy prices account for most of the variation in this ratio. Price elasticities estimated from these results are lower than those estimated by neoclassical economists and indicate that the system boundaries used by neoclassical economists overestimate the amount of energy saved by substitution. Analysis of the error term from the regression results indicates that energy-saving technical change has had little effect on the amount of energy used to support economic activity.

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