ICT Investment for Energy Use in the Industrial Sectors (Lecture Notes in Energy, 59)

This book investigates the impact of production input factors on the market, consumer and producer energy demand characteristics in 30 industrial sectors for South Korea over the period 1980–2009, and for Japan over the period 1973-2006, with special emphasis placed on the effects of ICT investment on the demand for energy. A dynamic factor demand model is developed, accounting for the adjustment costs that are defined in terms of forgone output from current production. It addresses four key aspects of production and energy demand in manufacturing: first, it establishes the various relationships between different factors of production. Second, it investigates whether the energy demand in the industrial sectors in South Korea would be decreased or increased by substituting/complementing with other input factors such as ICT capital and labor. Third, it looks at sources of growth in the industrial sectors through decomposing the Divisia index based total factor productivity (TFP). Finally it provides appropriate policy recommendations based on these findings. The results of this study may provide industrial sectors’ stakeholders and environmental and industrial policy makers with a flexible model that has the capacity to assess outcomes of various policies under certain scenarios. The factor demand methodology described in this book is very advanced and up-to-date. It can be used when teaching advanced graduate courses and in empirically advanced research. Therefore, it is highly relevant in both teaching as a main or supplementary text and in particular as a reference handbook in conducting empirical research. The focus on ICT effects on energy use makes this book an important addition to the existing literature on industrial development. Preface 7 Acknowledgements 9 Contents 10 1 Overview 13 1.1 Introduction 13 1.2 Why This Study 16 1.3 Objectives 18 1.4 Research Significance 19 1.5 Research Design 21 1.6 Research Questions and Empirical Motivations 22 1.7 Assumptions and Limitations 22 1.7.1 Energy Price 23 1.7.2 Methodological and Theoretical Assumptions 23 1.8 Operational Definitions 23 1.9 Expected Results 28 1.10 The Structure of This Book 28 1.11 Summary 29 Bibliography 30 2 ICT Investment and Energy Use in South Korea and Japan 34 2.1 Introduction 35 2.2 ICT Investment 36 2.2.1 South Korea 37 2.2.2 Japan 39 2.3 Energy Use 41 2.3.1 South Korea 41 2.3.2 Japan 42 2.4 Energy Efficiency 44 2.4.1 South Korea 44 2.4.2 Japan 45 2.5 Summary 46 Bibliography 47 3 ICT Investment and Energy Use in the Literature 50 3.1 Efficiency in the Use of Energy 51 3.2 ICT Investment and Economics Growth 53 3.3 ICT Investment and Energy Use 55 3.4 Summary 57 Bibliography 58 4 The Factor Demand Model and the Theory of Productivity 61 4.1 Historical Development of the Factor Demand Models 62 4.1.1 The Firm’s Temporary Equilibrium 62 4.1.2 The Adjustment Cost 63 4.1.3 The Dynamic Factor Demand 64 4.2 The Industrial Demand Models for Input Factors 66 4.3 Inter-Factor Substitutability and Complementarity 67 4.4 The Total Factor Productivity 72 4.5 Summary 74 Bibliography 75 5 The EUKLEMS Data 81 5.1 Data Source 81 5.2 Population and Sampling Strategy 83 5.3 Classification of the Industrial Sectors 87 5.4 Summary Statistics 89 5.5 Multicollinearity and Validation of Results 89 5.6 Industrial Sectors’ Energy Use Intensity 93 Bibliography 94 6 The Impact of ICT Investment on Energy Use: A Comparative Study Between South Korea and Japan 95 6.1 Introduction 95 6.2 Theoretical Model and Empirical Specification 98 6.3 Parameters Estimates 104 6.4 The Adjustment Speed 109 6.5 Deviation from the Optimal Values 113 6.6 The Own and Cross Price Elasticities 115 6.7 Conclusion 120 Bibliography 121 7 Productivity Analysis of South Korean Industrial Sector 125 7.1 Introduction 125 7.2 Stages in the Industrial and Technological Polices 127 7.3 Divisia Index 128 7.4 Theoretical Model and Empirical Specification 131 7.5 Determinants of the TFP Growth 134 7.6 Capacity Utilization Index 140 7.7 Price and Output Elasticities 142 7.8 Returns to Scale 145 7.9 The Rate of Technical Change 147 7.10 The TFP Growth 149 7.11 The Output Growth 152 7.12 Conclusion 153 Bibliography 153 8 Overall Summary, Hypotheses Test, and Policy Implications 157 8.1 Introduction 157 8.2 The Research Questions and the Hypotheses 159 8.2.1 The Research Questions 159 8.2.2 Hypotheses Test 160 8.3 Summary of Results and Policy Implications 161 8.4 Implications for Industry and Policy Makers 166 8.5 Conclusions and Practical and Policy Recommendations 167 8.6 Contribution to the Literature 169 8.7 Limitations of the Study and Recommendations for Further Research 171 Bibliography 172 "This book investigates the impact of production input factors on the market, consumer and producer energy demand characteristics in 30 industrial sectors for South Korea over the period 1980-2009, and for Japan over the period 1973-2006, with special emphasis placed on the effects of ICT investment on the demand for energy. A dynamic factor demand model is developed, accounting for the adjustment costs that are defined in terms of forgone output from current production. It addresses four key aspects of production and energy demand in manufacturing: first, it establishes the various relationships between different factors of production. Second, it investigates whether the energy demand in the industrial sectors in South Korea would be decreased or increased by substituting/complementing with other input factors such as ICT capital and labor. Third, it looks at sources of growth in the industrial sectors through decomposing the Divisia index based total factor productivity (TFP). Finally it provides appropriate policy recommendations based on these findings. The results of this study may provide industrial sectors' stakeholders and environmental and industrial policy makers with a flexible model that has the capacity to assess outcomes of various policies under certain scenarios. The factor demand methodology described in this book is very advanced and up-to-date. It can be used when teaching advanced graduate courses and in empirically advanced research. Therefore, it is highly relevant in both teaching as a main or supplementary text and in particular as a reference handbook in conducting empirical research"-- Provided by publisher Front Matter....Pages i-xiii Overview....Pages 1-21 ICT Investment and Energy Use in South Korea and Japan....Pages 23-38 ICT Investment and Energy Use in the Literature....Pages 39-49 The Factor Demand Model and the Theory of Productivity....Pages 51-70 The EUKLEMS Data....Pages 71-84 The Impact of ICT Investment on Energy Use: A Comparative Study Between South Korea and Japan....Pages 85-114 Productivity Analysis of South Korean Industrial Sector....Pages 115-146 Overall Summary, Hypotheses Test, and Policy Implications....Pages 147-164