Interregional energy substitution in manufacturing in the United States

Abstract

This paper applies a translog price possibility frontier to a pooled sample in order to measure the extent of energy substitution effects in manufacturing industries. The results clearly indicate that relative changes in energy prices have significant effects on consumption. This, in turn, has important implications for public policy. In particular, the market system appears better able to deal with exogenous shifts in energy supplies than has frequently been assumed in the formulation of public policies toward the energy crisis.