ECONOMETRIC ANALYSIS OF INTERACTION BETWEEN ENERGY UTILIZATION AND INDUSTRIAL PRODUCTION FOR TAIWAN, R.O.C.

SSU-LI CHANG, University of Pennsylvania

Abstract

This study is conducted to investigate the characteristic of the relation between energy and economy to highlight the possibilities and the consequences on energy demand and the pattern of industrial development for Taiwan, the Republic of China. The links among patterns of energy utilization, aggregate economic activity and industrial productivity have been identified by a quantitative model that relates the market mechanisms for energy products, non-energy products and primary factors of production underlying the determination of industrial growth. The negative effects of change of energy prices and the prices nature and magnitude of these effects on industrial sectors have also been probed by policy simulation. The framework of study is composed with three submodels: Production Structure Model, Industrial Energy Demand Model and Dynamic Integration Model. The linkage of each submodel is that the demand of labor and capital is determined in the Integrator Model, which served as a dynamic operator of the system. Next, the result is input into the Production Structure Model to determine the industrial output level. The demand of specific fuel to sustain the determined output level is then obtained by Industrial Energy Demand Model. Finally, the demand of sectoral energy is aggregated and input into the energy production sectors to decide the aggregated level of energy output. A cost share approach is adopted in this stage that the price possibility frontier for the corresponding sector is generated as a function of relative fuel prices. The translog specification of the cost frontiers appears to provide a satisfactory characterization of the structure of Taiwan's energy market. All fuels are shown to be own price sensitive. For the interfuel elasticities of substitution, the results suggests that substantial change in energy market occurred after the oil embargo. Particularly the relation between coal and electricity, which changed from substitutes to complements after 1973. On the other hand, the pairs of coal and petroleum products and petroleum products and electricity are both substitutable over the years. The parameter estimated for the respective sectoral demand of coal, petroleum products and electricity is found statistically insignificant. The result of simulation is presented, policy implications are drawn and recommendations are made.

Subject Area

Management|Business costs|Public administration

Recommended Citation

CHANG, SSU-LI, "ECONOMETRIC ANALYSIS OF INTERACTION BETWEEN ENERGY UTILIZATION AND INDUSTRIAL PRODUCTION FOR TAIWAN, R.O.C." (1986). Dissertations available from ProQuest. AAI8623979.
https://repository.upenn.edu/dissertations/AAI8623979

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