This paper tries to test an economic explanation of the industrial demand for electricity in Colombia during the period 1970-1983. The estimation of the translog equations shows the complementary or substitutability between energy and other inputs in the industrial production function. After testing the complementarily between energy and capital, we estimate a model of energy demand in terms of the time series of the aggregate capital stock of industry. In order to avoid ad-hoc assumptions about the initial capital stock we use specific modeling that leaves that variable as a parameter to be estimated. On the other hand, the optimizing behavior of the entrepreneur determines the relative shares of electricity purchases and auto generation expenses in the total energy bill. This choice is represented as a cost minimization process subject to CES technological constraints. Finally, in order to improve estimator’s precision bootstrap procedures are applied.
