Energy substitutability in transition agriculture: estimates and implications for Hungary |
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| Authors: | Bhavani Shankar Jenifer Piesse Colin Thirtle |
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| Institution: | Department of Agricultural and Food Economics, University of Reading, P.O. Box 237, Reading RG6 6AR, UK;School of Social Science and Public Policy, King's College London, 150 Stamford Street, London SE1 9NN, UK;University of Stellenbosch, Private Bag XI, Matieland, South Africa;Department of Environmental Science and Technology, Imperial College of Science, Technology and Medicine, RSM Building, Prince Consort Road, London SW7 2BP, UK;Department of Agricultural Economics, Extension and Rural Development, University of Pretoria, Pretoria, South Africa |
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| Abstract: | Subsidised energy prices in pre‐transition Hungary had led to excessive energy intensity in the agricultural sector. Transition has resulted in steep input price increases. In this study, Allen and Morishima elasticities of substitution are estimated to study the effects of these price changes on energy use, chemical input use, capital formation and employment. Panel data methods, Generalised Method of Moments (GMM) and instrument exogeneity tests are used to specify and estimate technology and substitution elasticities. Results indicate that indirect price policy may be effective in controlling energy consumption. The sustained increases in energy and chemical input prices have worked together to restrict energy and chemical input use, and the substitutability between energy, capital and labour has prevented the capital shrinkage and agricultural unemployment situations from being worse. The Hungarian push towards lower energy intensity may be best pursued through sustained energy price increases rather than capital subsidies. |
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| Keywords: | Q4 P2 |
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