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The Induced Innovation Hypothesis and Energy-Saving Technological Change

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  • Stavins, Robert
  • Jaffe, Adam
  • Newell, Richard

    () (Resources for the Future)

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

  • Stavins, Robert & Jaffe, Adam & Newell, Richard, 1998. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," Discussion Papers dp-98-12-rev, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-98-12-rev
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    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
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    11. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
    12. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3, Specia), pages 783-832.
    13. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1988. "Appropriating the Returns from Industrial R&D," Cowles Foundation Discussion Papers 862, Cowles Foundation for Research in Economics, Yale University.
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