Asymmetric adaptations to energy price changes

The effectiveness of policies to reduce the use of energy depend on the elasticity of substitution between the various inputs and on the rate of technological progress. This paper presents a theoretical model emphasising energy investments’ characteristics of uncertainty and irreversibility that result in testable hypotheses concerning the relative values of substitution parameters and rates of technological change in periods of high and increasing energy prices and in periods of low prices. Estimation results for a panel of sectors of the Dutch economy show that the elasticity of substitution between energy and other inputs is low in periods of low energy prices, whereas it is significantly higher in the preceding period of high and increasing energy prices. Furthermore, energy-saving technological progress in periods of high and increasing energy prices is also significantly higher than if energy prices are low and falling. The regression results suggest that, due this asymmetric response of firms to changes in energy prices, taxing energy in the current period of low energy prices will not yield substantial reductions in energy use of Dutch industry.

Knowledge Externalities, Agglomeration Economies, and Employment Growth in Dutch Cities

This paper extends the work of Glaeser et al.(1992) by looking at effects of agglomeration economies on employment growth in Dutch city-industries and in very small (postal) zip code-industries in the Dutch province of South-Holland. At both levels of geographic detail, findings are broadly consistent with results from the earlier study in that employment growth is enhanced by industrial diversity and local competition, but retarded by industrial specialization.Also, a novel feature of the analysis presented here is that we examine the extent to which agglomeration economies in one location affect employment growth in other locations.economic growth;employment;urban areas

Threshold effects of energy price changes

This paper presents a theoretical model emphasising energy investments’characteristics of uncertainty and irreversibility. The theoretical modelsuggests threshold effects. Firms are induced to substitute away from energyonly if prices of energy exceed a certain threshold level and they reverse thetechnology only if energy prices are low enough. Estimating a simpleinvestment relation using panel data for the Dutch economy, we findevidence for threshold effects.

The Human Side of Diabetes Care

Theory predicts that the presence of fixed costs affects the relationship between energy use and energy price changes, as the firm's output and investment decisions respond differently to energy price increases and decreases. The asymmetry in response to energy price changes is exacerbated by uncertainty with respect to future energy prices, but to date the empirical literature does not explicitly take uncertainty into account. The contribution of this paper is twofold. First, we develop a new measure of energy price uncertainty. Second, we apply the measure to explain energy use in 8 OECD countries between 1978 and 1996, trying to identify whether indeed energy price uncertainty effects the asymmetry resulting from changes in energy use.