Estimation of China's Industrial Sectors' Energy CES Production Function

The elasticity of substitution and the functional are cornerstones of the CGE model. First,this paper constructed China's industrial sectors' input and output data 1980—2010,including input prices and quantities, output prices and quantities. Then econometric method was used to estimate China's industrial sectors' energy CES functional form and factor elasticity of substitution. Some important results are found. First,(KE)L functional form was more feasible for China's industrial sectors, with elasticity of substitution between capital and energy 0.32 and between capital-energy aggregate and labor 0.22. Second, China's industrial sectors exhibited capital-augmenting, energy-augmenting and labor-augmenting technological changes in the sample period with the rates of-4%,2% and 6% respectively.