The Energy Representation of World GDP
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ORIGINAL PAPER
The Energy Representation of World GDP Boris M. Dolgonosov1 Received: 15 June 2020 / Revised: 4 August 2020 / Accepted: 11 August 2020 © Springer Nature Switzerland AG 2020
Abstract The GDP–energy relationship is considered on a global scale. We propose a model which represents world gross product as a power-law function GDP = g(EU)𝛾 of current energy consumption E and total energy U consumed over all previous years and materialized in the form of production infrastructure. This energy-based production function has two parameters g and 𝛾 that retain their values throughout the years under study (1965–2018), and hence they can be regarded as fundamental characteristics of the world economy within the energy paradigm that considers labor and capital as energy entities. The model describes empirical data with high accuracy (error 1.2%), despite the fact that energy consumption and GDP increase greatly over the period under study. To provide a robustness check, the production function was fitted to the data for a shortened interval of 1965–2000 with a further projection until 2018, which showed a small error of 1.8% in the target interval of 2001–2018. An additional verification of the model, based on the power-law dependencies of GDP, E and U on world population, confirmed the functional form of the production function and led to almost the same parameter values as those obtained independently. Keywords World GDP · Production function · Energy consumption · Materialized energy · Population dependencies
Introduction Y= World economy is driven by energy which is used to build and operate production infrastructure. The global infrastructure has an energy measure equal to the total energy that has been used to create it in all previous years. In essence, this cumulative energy is materialized in the infrastructure, while its work is provided by the current energy consumption. The world economy as a production system is characterized by a production function that can be considered from an energy point of view. This approach will allow drawing parallels between energy and such classical concepts as labor and capital, which, following Cobb and Douglas (1928), determine the production function. More detailed models based on the Solow’s (1956) theory consider labor, capital and energy as independent quantities (Csereklyei et al. 2016; Gozgor et al. 2018). Stern and Kander (2012) introduced a production function in which gross output has the form
* Boris M. Dolgonosov [email protected] 1
Haifa, Israel
( ) ( )𝜙 )𝜙 1∕𝜙 1∕𝜎 1∕𝜎 ( 𝛾V A𝛽L L𝛽 K 1−𝛽 + 𝛾E AE E ,
(1)
where L = labor, K = capital, E = energy, AL and AE are the augmentation indices, 𝜎 is elasticity, 𝜙 = (𝜎 − 1)∕𝜎, 𝛾V + 𝛾E = 1 . This approach is useful if the task requires separate control of labor, capital and energy. However, if the task is to find gross output based on energy consumption for a series of years regardless of how labor and capital change (if necessary, they can be found after solving this task), then this approach is redundant
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