The Implications of Regulation for Induced Technical Change
AbstractThe purpose of this paper is to extend the Averch-Johnson model of the regulated firm so as to allow for the endogenous selection of factor augmenting technical change. A simple model is developed which avoids the questions of timing, capitalization, and internalization of innovations and focuses on the incentives to a firm for innovational choice under cost minimizing conditions versus several formulations of the regulated setting. The results suggest that regulation can distort the innovational selections. Moreover, in the case of the profit maximizing firm subject to "fair" return on investment regulation, the innovational choices will reinforce the static overcapitalization tendencies.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 5 (1974)
Issue (Month): 2 (Autumn)
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- Macauley, Molly K., 2009. "Waste Not, Want Not: Economic and Legal Challenges of Regulation-Induced Changes in Waste Technology and Management," Discussion Papers dp-09-11, Resources For the Future.
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- Mark Frank, 2003. "An Empirical Analysis of Electricity Regulation on Technical Change in Texas," Review of Industrial Organization, Springer, vol. 22(4), pages 313-331, June.
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