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Induced Innovation and Energy Prices

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  • David Popp

Abstract

I use U.S. patent data from 1970 to 1994 to estimate the effect of energy prices on energy-efficient innovations. Using patent citations to construct a measure of the usefulness of the existing base of scientific knowledge, I consider the effect of both demand-side factors, which spur innovative activity by increasing the value of new innovations, and supply-side factors, such as scientific advancements that make new innovations possible. I find that both energy prices and the quality of existing knowledge have strongly significant positive effects on innovation. Furthermore, I show that omitting the quality of knowledge adversely affects the estimation results. (JEL O31, Q40, Q42)

Suggested Citation

  • David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
  • Handle: RePEc:aea:aecrev:v:92:y:2002:i:1:p:160-180 Note: DOI: 10.1257/000282802760015658
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    References listed on IDEAS

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    1. Binswanger, Hans P, 1974. "A Microeconomic Approach to Induced Innovation," Economic Journal, Royal Economic Society, vol. 84(336), pages 940-958, December.
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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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