Factor substitution and complementarity in energy: a case study of the UK electricity industry.

The UK electricity supply industry appears to have experienced an increasing capital to labor ratio in the post-war period. Whilst it is important to analyse the nature of the substitution process between these two factors of production, this paper proceeds on the basis that capital and labor substitutability cannot be considered in isolation from the impact of the energy input in the production process. The increase in the real price of energy which the UK has recently experienced has had many consequences upon the British economy, not least the fact that the importance of energy as a factor input is now recognized.
This paper reports some empirical estimates of factor substitutability in the electricity industry taking full account of energy as a separate input. [ABSTRACT FROM AUTHOR]