Astrid Kander

We examine the role of substitution from traditional to modern energy carriers and of
differential rates of innovation in the use of each of these in Sweden from 1850 to 1950.
We use a simple growth model with a nested CES production function and exogenous
factor augmenting technological change and carry out a growth accounting
decomposition based on the econometric results. Energy and energy augmenting
technological change contributed more than a third of the economic growth in this
period. Even though the rate of technical change was much larger for modern energy,
innovation in the use of traditional energy carriers contributed more to growth between
1850 and 1890, since the cost share of traditional energy was so much larger than that
of modern energy in that period. However, after 1890 we find that modern energy
contributed much more to economic growth than traditional energy, but increasingly
labor augmenting technological change and capital accumulation became the most
important drivers of growth in the final decades of the period.