Capital, labor, energy and creativity: modeling innovation diffusion

Economic Growth in the USA and Germany 1960–2013: The Underestimated Role of Energy

“…With constant technology parameters, recalibrated once, in 1978, a nearly residualfree description of growth between 1960 and 1990 in the Federal Republic of Germany (FRG), the USA, and Japan was possible; the recessions due to the two oil-price shocks from 1973 to 1975 and 1979 to 1981 were well reproduced (Hall et al 2001). Modeling continuous temporal changes of the technology parameters by, e.g., logistic functions, improved the agreement between theoretical and empirical growth (Kümmel et al 2002) and even allowed to describe economic growth in Germany between 1960 and 2000, including the reunification of Eastern and Western Germany in 1990 (Kümmel 2011). From these studies resulted what we now call "the fundamental heresy" with respect to neoclassical economics: Energy's output elasticities are much larger than its cost shares, and for labor just the opposite is true.…”

“…Modeling it by logistic functions, as Kümmel et al (2002) did, we have with the free (characteristic) coefficients p 0 , p 1 , p 2 , p 3 . For p 2 → ∞ the logistic function turns into the step function.…”

Cointegration of output, capital, labor, and energy

“…Furthermore, these models cannot explain the economic recessions 1973-75 and 1979-81, known as the energy crises due to the first and the second oil price shock. On the other hand, if the equality assumption is dismissed, LINEX production functions, 2 describe economic growth in Germany, Japan, and the USA without Solow residual, and the energy crises of the 1970s are reproduced well [4,5,6,7,8,1]. Their time-averaged output elasticities are for labor much smaller and for energy much larger than the factor cost shares.…”

Service Production Functions

“…6 Ayres (2001), Ayres and Warr (2001), Beaudreau (1998), Hall et al (2001), Kümmel et al (1985Kümmel et al ( , 2000Kümmel et al ( , 2002, Lindenberger (2000), and Lindenberger et al (2001).…”

“…The methodological approach has been applied previously to derive production functions modeling industrial evolution (Kümmel et al 1985(Kümmel et al , 2002. The approach takes into account the production factor energy, which enables to incorporate potential progress of automation, i.e.…”