The Induced Innovation Hypothesis and Energy-Saving Technological Change

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.


Issue Date:
1998
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10521
Total Pages:
43
JEL Codes:
L51; O31; O38; Q40; Q20; Q48
Series Statement:
Discussion Paper 98-12-REV




 Record created 2017-04-01, last modified 2017-08-23

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