The Induced Innovation Hypothesis and Energy-Saving Technological Change

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Date

March 31, 1998

Authors

Richard G. Newell, Adam Jaffe, and Robert Stavins

Publication

Working Paper

Reading time

1 minute

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.

Topics

Authors

Richard G. Newell

President and CEO, Resources for the Future

Dr. Richard G. Newell is the President and CEO of Resources for the Future. From 2009 to 2011, he served as the administrator of the US Energy Information Administration, the agency responsible for official US government energy statistics and analysis.

Adam Jaffe

Robert N. Stavins

Co-Vice Chair, RFF Board of Directors; University Fellow; Professor, Harvard University

Robert Stavins is a university fellow at RFF and the Co-Vice Chair of the RFF Board of Directors. His research focuses on diverse areas of environmental economics and policy.

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