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Factor Input Substitution in Irish Manufacturing. ESRI WP475. January 2014

Haller, Stefanie A. and Hyland, Marie (2014) Factor Input Substitution in Irish Manufacturing. ESRI WP475. January 2014. [Working Paper]

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    We use a translog cost function to model production in the Irish manufacturing sector over the period from 1991 to 2009. We estimate both own- and cross-price elasticities and Morishima elasticities of substitution between capital, labour, materials and energy. We find that capital and energy are substitutes in the production process. Across all firms we find that a 1% rise in the price of energy is associated with an increase of 0.1% in the demand for capital. The Morishima elasticities, which reflect the technological substitution potential, indicate that a 1% increase in the price of energy causes the capital/energy input ratio to increase by 1.58%. The demand for capital in larger, more energy-intensive, foreign-owned and export-oriented firms is less responsive to increases in energy prices. We also observe a sharp decline in firms’ responsiveness between the first half of the sample period (the 1990s) and second half (the 2000s).

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > industrial policy
    Countries > Ireland
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Economic and Social Research Institute (ESRI), Dublin > ESRI Working Papers
    Depositing User: Alyssa McDonald
    Official EU Document: No
    Language: English
    Date Deposited: 18 Jul 2017 15:59
    Number of Pages: 37
    Last Modified: 18 Jul 2017 15:59

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