Of Energy and the Economy - Theory and Evidence of Their Functional Relationships

ISBN-13: 9783836427661 / Angielski / Miękka / 2007 / 140 str.

Vincent Chang

Opis

This book advances a set of explicit functional relationships that link energyand the economy. Despite the reliance on energy permeating the wholeeconomy, no such complete relationships had been presented before. Howrelated are energy and the economy? What role does energy play in the economicgrowth? Motivated to seek an explicit functional answer, I theorize therole of energy and then test it with economic models, using data for 16 OECDcountries from 1980 to 2001. First, I find that energy is a cross-country representativegood whose prices are equalized when converted to a referencecurrency. Thus, energy prices satisfy the purchasing power parity. For all butone country, the half life of the real energy exchange rate is less than a yearand as low as six months, shorter than those derived by other real exchangerate measures. Second, considering energy a cross-time representative good,I obtain that a countrys utility function is inversely proportional to both its incomeshare of energy and its energy price. I also obtain an explicit, unifiedtwo-dimensional (cross countries and time) production function with energyand non-energy as the two inputs. Third, I conclude a cross-country parityrelationship for income shares of energy, similar to that for energy prices.Further, I provide an intertemporal connection between the trajectory of theincome share of energy and the productivity growth of the economy. Lastly, Idemonstrate the tradeoffs between energy efficiency and economic wellbeing,with the energy price being the medium for the tradeoffs. One mayapply the functional roles of energy offered by this book to help frame thecurrent global-scale issues that are energy relevant.