Regional dimensions of factor and fuel substitution in U.S. manufacturing
This paper analyzes the regional responses to price increases in U.S. manufacturing in the form of fuel and factor substitution. A translog specification of a production process with eight inputs organized into a two stage optimization process
optimizing the mix of four fuels that constitute the energy input and then optimizing the input mix of physical capital, working capital, labor and aggregate energy is used. Sectoral and regional variations in factor and fuel substitutions as evident from
econometric estimation of the model at the level of 50 states and four census regions are discussed and interpreted.