Firm-Level Evidence on Directed Technological Change Involving Energy Inputs in Portugal.

Economic performance is closely related with energy consumption, the major part of which comes from non-renewable sources. While endeavoring to promote renewable energy, policy makers are interested in technological change that also increases energy e¢ ciency. However, both growth models of directed technological change and microeconomic theories regarding innovation suggest that technological change is not necessarily biased towards energy. In order to investigate directed technological change at the micro level, this paper applies stochastic frontier analysis to firm data for 32 economic subsectors, with respect to output produced with four inputs: capital, labor, electricity and fuel. Sub-sectors demonstrate di¤erent levels of technical ine¢ ciency, upon which positive marginal e¤ects are imposed by capital deepening and financial income. Output elasticity of labor is generally high among the subsectors, emphasizing labor as the main driver for economic growth. Output elasticity of capital is low overall, although a few subsectors enjoy better marginal returns. In most subsectors, technological change is biased the most towards labor; between electricity and fuel, technological change has favored fuel in more cases. Policy suggestions may include promoting education; supporting R&D that boosts TFP; encouraging the adoption of energy-e¢ cient technologies in production, among others. [ABSTRACT FROM AUTHOR]