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Fueling Innovation: The Impact of Oil Prices and CAFE Standards on Energy-Efficient Automotive Technology

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  • Joseph M. Crabb
  • Daniel K.N. Johnson

Abstract

This paper tests the induced innovation hypothesis that higher oil prices will lead to increased innovation in energy-efficient automotive technology. Using a dynamic model of patenting, we find robust empirical support for the hypothesis, concluding that both the acquisition cost and retail markup portion of fuel prices are powerful in generating subsequent innovation. Our results include the effects of CAFE regulations, finding no evidence of their impact on innovation, even within a model that endogenizes them via fuel price expectations.

Suggested Citation

  • Joseph M. Crabb & Daniel K.N. Johnson, 2010. "Fueling Innovation: The Impact of Oil Prices and CAFE Standards on Energy-Efficient Automotive Technology," The Energy Journal, , vol. 31(1), pages 199-216, January.
    • Handle: RePEc:sae:enejou:v:31:y:2010:i:1:p:199-216
    DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No1-9
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    References listed on IDEAS

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    1. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    2. Jean O. Lanjouw & Ariel Pakes & Jonathan Putnam, 1998. "How to Count Patents and Value Intellectual Property: The Uses of Patent Renewal and Application Data," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 405-432, December.
    3. repec:bla:jindec:v:46:y:1998:i:4:p:405-32 is not listed on IDEAS
    4. Davis, Michael C & Hamilton, James D, 2004. "Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 17-37, February.
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    7. Xia, Jingwen & Zhang, Zibin, 2025. "How do fuel economy standards affect product structure and technology changes? Evidence from China's firm-level data," Energy Economics, Elsevier, vol. 143(C).

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