How ICT investment influences energy demand in South Korea and Japan
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- Khayyat, N.T., Lee, J. & Heo, E. Energy Efficiency (2016) 9: 563. doi:10.1007/s12053-015-9384-9
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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.