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The Implications of Regulation for Induced Technical Change

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  • V. Kerry Smith

Abstract

The purpose of this paper is to extend the Averch-Johnson model of the regulated firm so as to allow for the endogenous selection of factor augmenting technical change. A simple model is developed which avoids the questions of timing, capitalization, and internalization of innovations and focuses on the incentives to a firm for innovational choice under cost minimizing conditions versus several formulations of the regulated setting. The results suggest that regulation can distort the innovational selections. Moreover, in the case of the profit maximizing firm subject to "fair" return on investment regulation, the innovational choices will reinforce the static overcapitalization tendencies.

Suggested Citation

  • V. Kerry Smith, 1974. "The Implications of Regulation for Induced Technical Change," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 623-632, Autumn.
    • Handle: RePEc:rje:bellje:v:5:y:1974:i:autumn:p:623-632
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    Cited by:

    1. Nancy L. Rose & Paul L. Joskow, 1990. "The Diffusion of New Technologies: Evidence from the Electric Utility Industry," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 354-373, Autumn.
    2. Macauley, Molly K., 2009. "Waste Not, Want Not: Economic and Legal Challenges of Regulation-Induced Changes in Waste Technology and Management," RFF Working Paper Series dp-09-11, Resources for the Future.
    3. Mirucki, Jean, 1980. "Vérification des conditions d'efficacité dans la production chez Bell Canada [Checking the conditions of efficient production in Bell Canada]," MPRA Paper 30147, University Library of Munich, Germany, revised Jun 1980.
    4. Jamasb, T. & Pollitt, M., 2005. "Deregulation and R&D in Network Industries: The Case of the Electricity Industry," Cambridge Working Papers in Economics 0533, Faculty of Economics, University of Cambridge.
    5. Mark Frank, 2003. "An Empirical Analysis of Electricity Regulation on Technical Change in Texas," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(4), pages 313-331, June.
    6. Mirucki, Jean, 1980. "Comportement de l'entreprise réglementée: étude de l'hypothèse Averch-Johnson [Behavior of the Regulated Firm: A Study of the Averch-Johnson Hypothesis]," MPRA Paper 27669, University Library of Munich, Germany, revised 1982.
    7. Jamasb, Tooraj & Pollitt, Michael, 2008. "Liberalisation and R&D in network industries: The case of the electricity industry," Research Policy, Elsevier, vol. 37(6-7), pages 995-1008, July.
    8. Gerald Granderson, 1999. "The Impact of Regulation on Technical Change," Southern Economic Journal, John Wiley & Sons, vol. 65(4), pages 807-822, April.
    9. Nykamp, Stefan & Andor, Mark & Hurink, Johann L., 2012. "‘Standard’ incentive regulation hinders the integration of renewable energy generation," Energy Policy, Elsevier, vol. 47(C), pages 222-237.
    10. Obeng, K., 2019. "Public transit cost efficiency studies: The impact of non-contracting regulations," Transportation Research Part A: Policy and Practice, Elsevier, vol. 126(C), pages 247-258.

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