This paper analyses the role of different components of technical change on energy intensity by applying a Translog variable cost function setting with (short- run) fixed capital to the new EU KLEMS dataset for five selected EU countries (Denmark, Italy, Netherlands, UK and Spain). The framework applied represents an accounting of technical change components, comprising autonomous (disembodied) as well as technical change embodied in capital goods. It is extended in order to incorporate embodied technical change induced by energy prices by adding an equation for (physical) capital stock accumulation. The model can be used for explaining and tracing back the long-run impact of the interaction of prices, capital accumulation and technical change on energy intensity. The empirical results distinguish between industries with embodied technical change and industries with capital-energy complementarity.
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Kurt Kratena (2007) studied this question.
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