Factor Demand in Swedish Manufacturing Industry with Special Reference to the Demand for Energy. Instantaneous Adjustment Models; Some Results

摘要

The dual approach to the theory of production is used to estimate factor demand functions of the Swedish manufacturing industry. Two approximations of the cost function, the translog and the generalized Leontief models, are used. The price elasticities of the factor demand do not seem to depend on the choice of model. This is at least true as to the sign pattern and as to the inputs capital, labor, total energy and other materials. Total energy is separated into solid fuels, gasoline, fuel oil, electricity and a residual. Fuel oil and electricity are found to be substitutes by both models. Capital and energy are shown to be substitutes. This implies that Swedish industry will save more energy if the capital cost can be reduced. Both models are, in the best versions, able to detect an inappropriate variable. The assumption of perfect competition on the product market, is shown to be inadequate by both models. When this assumption is relaxed, the normal substitution pattern among the inputs is resumed.