Energy substitutability in transition agriculture: estimates and implications for Hungary
2017
Shankar, Bhavani | Piesse, Jenifer | Thirtle, Colin
Subsidised energy prices in pre-transition Hungary had led to excessive energy intensity in the agricultural sector. Transitionhas resulted in steep input price increases. In this study, Allen and Morishima elasticities of substitution are estimated to studythe 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 andsubstitution elasticities. Results indicate that indirect price policy may be effective in controlling energy consumption. Thesustained increases in energy and chemical input prices have worked together to restrict energy and chemical input use, andthe substitutability between energy, capital and labour has prevented the capital shrinkage and agricultural unemploymentsituations from being worse. The Hungarian push towards lower energy intensity may be best pursued through sustainedenergy price increases rather than capital subsidies.© 2003 Elsevier B.V. All rights reserved.
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