How ICT investment influences energy demand in South Korea and Japan
This empirical study examines substitute/complementary relationships in the demands for ICT capital, non-ICT capital, energy, materials, and labor in the industrial sectors in Japan and South Korea during 1973–2006 and 1980–2009, respectively. In doing so, a dynamic factor demand model is applied to link intertemporal production decisions by explicitly recognizing that the level of certain factors of production (referred to as quasi-fixed factors: ICT and non-ICT capital) cannot be changed without incurring so-called adjustment costs, defined in terms of forgone output from current production. Special emphasis is on the effects of ICT investment on energy use through the substitute/complementary relationships. This study quantifies how ICT capital investment in South Korea and Japan affects industrial energy demand. We find that ICT and non-ICT capital investment serve as substitutes for the inputs of labor and energy use. The results also demonstrate significant cost differences across industries in both countries.
KeywordsDynamic factor demand Panel data ICT investment Energy demand
JEL ClassificationC32 C33 Q41
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