Dynamic translog and linear logit models: a factor demand analysis of interfuel substitution in US industrial energy demand

摘要

We compare and contrast two popular dynamic flexible functional forms for cost functions, the translog and the logit [J. Bus. Econ. Stat. 8 (1990) 347―353], using data on US industrial energy demand from 1960 to 1992 which has been analysed by previous studies (Energy Econ. 11 (1989) 89―94; Appl. Econ. 21 (1989) 931―945; J. Bus. Econ. Stat. 13 (1995) 459―465]. We show the crucial role played by different dynamic formulations of the translog in this analysis of factor demands with respect to rates of dynamic adjustment and substitution possibilities. We conclude that the poor performance of the dynamic translog relative to the dynamic logit cannot be explained solely by dynamic model mis-specification or the inclusion of price-unresponsive non-energy fuel use data. Our most robust empirical result is that coal and oil are substitutes.