Exploring the US mining industry's demand system for production factors: Implications for economic sustainability

Abstract

This study conducts a dynamic analysis of the U.S. mining industry's input demand system. Employing the dynamic linear logit model, the study examines how the dynamic adjustment occurs in the mining industry and investigates the relationships among primary inputs used for mining production. With the sluggish adjustment in the input demand system, the results reveal that the mining industry has little flexibility in adjusting the demand for inputs in the short run. While the demand for capital, material, and service becomes elastic in the long run, the mining industry still has inelastic demand for energy and labor. Regarding the relationships among capital, labor, and energy, the results show that there is no statistical evidence of labor-saving capital substitution, implying that the mining industry is not likely to replace labor with capital in response to increasing wage rates. However, despite the small substitution rate, there exists a substitutable relationship between capital and energy, which can contribute to energy-saving capital usage in response to increasing energy prices.