Substitution between Energy, Capital and Labour within Industrial Companies: A Micro Panel Data Analysis

Based on micro panel data for industrial companies, we estimate factor demand models with electricity, other energy, labour and machine capital as flexible inputs using both the translog and the linear logit specification. As opposed to the few previous micro (cross-section) data studies we find that both electricity and other energy are complements with capital. Substitution between electricity and other energy is limited. The own-price elasticity for electricity is 0.21 in the translog model and 0.19 in the linear logit model. The corresponding own-price elasticities are 0.45 and 0.23 for other energy, 0.08 and 0.05 for labour and 0.45 and 0.34 for capital.