Working Paper
In this paper, the authors argue two theses. First, they suggest that economies evolve along a long-term trajectory that corresponds closely to increases in the production and consumption of useful work (in the thermodynamic sense) rather than energy (exergy) inputs per se. Second, they argue that when economies experience sudden shocks and structural changes, due (for instance) to wars or major economic depressions, they are accompanied by significant changes in the quantity and patterns of energy (exergy) consumption and useful work output.
To support these assertions, the authors have performed unit root and structural change tests to characterize the temporal behavior of the factors of production. These results have implications for understanding the role of energy in the economy, for modeling co-variation between output and factor inputs and for identification of the most appropriate form of the production function.
