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The Induced Innovation Hypothesis and Energy-Saving Technological Change

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  • Newell, Richard G.
  • Jaffe, Adam B.
  • Stavins, Robert N.

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) 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. & Jaffe, Adam B. & Stavins, Robert N., 1998. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," Discussion Papers 10521, Resources for the Future.
  • Handle: RePEc:ags:rffdps:10521
    DOI: 10.22004/ag.econ.10521
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    File URL: https://ageconsearch.umn.edu/record/10521/files/dp980012.pdf
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    References listed on IDEAS

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    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
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