The Induced Innovation Hypothesis and Energy-Saving Technological Change

Posted: 26 Jun 2000

See all articles by Richard G. Newell

Richard G. Newell

Duke University - Nicholas School of Environment; National Bureau of Economic Research (NBER); Resources for the Future

Adam B. Jaffe

Brandeis University; Motu Economic and Public Policy Research; National Bureau of Economic Research (NBER)

Robert N. Stavins

Harvard University - Harvard Kennedy School (HKS); Resources for the Future; National Bureau of Economic Research (NBER)

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Abstract

We develop a methodology for testing Hick's induced innovation hypothesis by estimating a product-characteristics model of energy-using consumer durables, augmenting the hypothesis to allow for the influence of government regulations. For the products we explored, the evidence suggests: (i) that the rate of overall innovation was independent of energy prices and regulations, (ii) the direction of innovation was responsive to energy price changes for some products but not for others, (iii) energy price changes induced changes in the subset of technically feasible models that were offered for sale, (iv) this responsiveness increased substantially during the period after energy-efficiency product labeling was required, and (v) nonetheless, a sizeable portion of efficiency improvements were autonomous.

Suggested Citation

Newell, Richard G. and Jaffe, Adam B. and Stavins, Robert N., The Induced Innovation Hypothesis and Energy-Saving Technological Change. Available at SSRN: https://ssrn.com/abstract=224329

Richard G. Newell (Contact Author)

Duke University - Nicholas School of Environment ( email )

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Adam B. Jaffe

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