Economic Growth in the USA and Germany 1960–2013: The Underestimated Role of Energy

Economic growth in Germany and the USA between the years 1960 and 2013 is analyzed, using two LinEx production functions Y_L1(K,L,E;t) and Y_L11(K,L,E;t) , which depend linearly on energy and exponentially on quotients of the production factors capital K ( t ), labor L ( t ), and energy E ( t ). The two production functions result from output elasticities that are the simplest, and next simplest, factor-dependent solutions of a set of partial differential equations and their asymptotic boundary conditions, which reflect technical trends in highly industrialized economies. The production functions depend on time t explicitly , when innovations and structural changes induce temporal variations of two technology parameters. The latter model capital effectiveness and the energy demand of the capital stock. In this article, we present some econometric evidence that, in conjunction with capital, the production factor energy provides the major contribution, and the temporal variations of the LinEx technology parameters provide the minor contribution to that part of economic growth that is assigned to “technical progress” by neoclassical economics. We also discuss assets and shortcomings of the two LinEx functions, and different aspects of using either primary energy data or exergy data for the energy variable E .