Capital Adjustment and the Optimal Fuel Choice

This paper analyzes the important, yet often ignored, link between capital adjustment and the choice of fuels used by manufacturing firms. A novel econometric framework, which explicitly incorporates heterogeneous fuel-using capital stocks in the e...

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Main Authors:	Hyland, Marie, Steinbuks, Jevgenijs
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
Subjects:	capital adjustment fuel choice fuel price fuel-use technology
Online Access:	http://documents.worldbank.org/curated/en/2016/10/26854337/capital-adjustment-optimal-fuel-choice http://hdl.handle.net/10986/25302

id	okr-10986-25302
recordtype	oai_dc
spelling	okr-10986-253022021-04-23T14:04:29Z Capital Adjustment and the Optimal Fuel Choice Hyland, Marie Steinbuks, Jevgenijs capital adjustment fuel choice fuel price fuel-use technology This paper analyzes the important, yet often ignored, link between capital adjustment and the choice of fuels used by manufacturing firms. A novel econometric framework, which explicitly incorporates heterogeneous fuel-using capital stocks in the estimation of optimal fuel choice, is applied to a large panel of Irish manufacturing firms. The econometric estimates show a significant variation in the optimal response of capital to changing fuel prices across different fuel-using technologies. For all the technologies, significant costs to capital adjustment are found. The costs are much larger compared with earlier estimates of adjustment costs based on lagged values of output and fuel prices. The findings imply that the path to full adjustment of capital stocks in response to changing fuel prices may be much longer than was previously thought. 2016-11-01T16:01:14Z 2016-11-01T16:01:14Z 2016-10 Working Paper http://documents.worldbank.org/curated/en/2016/10/26854337/capital-adjustment-optimal-fuel-choice http://hdl.handle.net/10986/25302 English en_US Policy Research Working Paper;No. 7857 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	capital adjustment fuel choice fuel price fuel-use technology
spellingShingle	capital adjustment fuel choice fuel price fuel-use technology Hyland, Marie Steinbuks, Jevgenijs Capital Adjustment and the Optimal Fuel Choice
relation	Policy Research Working Paper;No. 7857
description	This paper analyzes the important, yet often ignored, link between capital adjustment and the choice of fuels used by manufacturing firms. A novel econometric framework, which explicitly incorporates heterogeneous fuel-using capital stocks in the estimation of optimal fuel choice, is applied to a large panel of Irish manufacturing firms. The econometric estimates show a significant variation in the optimal response of capital to changing fuel prices across different fuel-using technologies. For all the technologies, significant costs to capital adjustment are found. The costs are much larger compared with earlier estimates of adjustment costs based on lagged values of output and fuel prices. The findings imply that the path to full adjustment of capital stocks in response to changing fuel prices may be much longer than was previously thought.
format	Working Paper
author	Hyland, Marie Steinbuks, Jevgenijs
author_facet	Hyland, Marie Steinbuks, Jevgenijs
author_sort	Hyland, Marie
title	Capital Adjustment and the Optimal Fuel Choice
title_short	Capital Adjustment and the Optimal Fuel Choice
title_full	Capital Adjustment and the Optimal Fuel Choice
title_fullStr	Capital Adjustment and the Optimal Fuel Choice
title_full_unstemmed	Capital Adjustment and the Optimal Fuel Choice
title_sort	capital adjustment and the optimal fuel choice
publisher	World Bank, Washington, DC
publishDate	2016
url	http://documents.worldbank.org/curated/en/2016/10/26854337/capital-adjustment-optimal-fuel-choice http://hdl.handle.net/10986/25302
_version_	1764458904177082368

Capital Adjustment and the Optimal Fuel Choice

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