The Demand for Energy in Swedish Manufacturing Industries

The price sensitivity of energy demand and the substitution possibilities between energy and other aggregate production factors in Swedish manufacturing industries are analyzed. Both homothetic and nonhomotethic specifications of a translog cost function are estimated using annual data for the period 1952-1976 for total Swedish manufacturing and for 12 manufacturing subsectors. The results indicate that relative changes in energy prices have significant effects on energy consumption. There is evidence, however, that adjustment to higher energy prices may be accompanied by a deceleration in investment.