Environmental Policy and Induced Technological Change: Evidence from Automobile Fuel Economy Regulations

Takahiko Kiso ()
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Takahiko Kiso: University of Aberdeen

Environmental & Resource Economics, 2019, vol. 74, issue 2, No 12, 785-810

Abstract: Abstract This paper investigates whether environmental or energy-efficiency regulations induce innovations in relevant technologies through focusing on the tightening of Japanese fuel economy regulations in the 1990s and the early 2000s. Unlike previous studies that analyze patent data, I use vehicle-level specification data for 1985–2004 to estimate whether regulatory pressure accelerated technological progress in fuel efficiency. I compare Japanese automakers with selected American and European automakers in a difference-in-differences framework. The estimation results provide strong evidence for induced technological change: conditional on other vehicle attributes and the production cost, the regulatory tightening induced at least a 3–5% improvement in the average Japanese vehicle’s fuel economy relative to a counterfactual case with no regulatory change, an effect which would have taken at least 4–7 years to be realized with no pressure from fuel economy regulations or fuel prices.

Keywords: Vehicles; Fuel economy regulations; Induced innovation; Technological change (search for similar items in EconPapers)
JEL-codes: L62 O30 Q48 Q55 Q58 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10640-019-00347-6

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