A DYNAMIC ANALYSIS OF INTERFUEL SUBSTITUTION IN US INDUSTRIAL ENERGY DEMAND

Using data for 1960-1992 to analyze interfuel substitution in the U.S. industrial sector, a dynamic linear legit model is shown to provide g lobal properties superior to those of a comparable dynamic translog mo del, confirming earlier static results by Considine. The linear legit model provides a direct, unbiased estimate of the rate of dynamic adju stment, Indicating a median response lag of less than two years. Exclu ding fuels used for nonenergy purposes yields larger estimates of the price elasticities for coal and oil and indicates generally greater po tential for interfuel substitution than when using aggregate data.