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Regulation and the Rate and Direction of Induced Technical Change

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  • Wesley A. Magat

Abstract

This article examines the effect of three forms of regulation (rate of return, ceiling-price, and markup) upon the rate and direction of technical advance selected by a myopic profit maximizing firms. With a homothetic production function ceiling-price regulation induces a faster rate of technical progress than would result without regulation, and faster than that which would result with markup regulation. In addition, our results lend no support for Smith's conjecture that technical advance causes an increase in the discrepancy between the resource allocations selected by a rate of return regulated firm and those chosen by an unregulated firm.

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  • Wesley A. Magat, 1976. "Regulation and the Rate and Direction of Induced Technical Change," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 478-496, Autumn.
    • Handle: RePEc:rje:bellje:v:7:y:1976:i:autumn:p:478-496
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    Cited by:

    1. T. Jamasb & R. Nepal, 2015. "Issues and Options in the Economic Regulation of European Network Security," Competition and Regulation in Network Industries, Intersentia, vol. 16(1), pages 2-23, March.
    2. 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.
    3. Paroma Sanyal, 2007. "The effect of deregulation on environmental research by electric utilities," Journal of Regulatory Economics, Springer, vol. 31(3), pages 335-353, June.
    4. Müller, Christine & Growitsch, Christian & Wissner, Matthias, 2010. "Regulierung und Investitionsanreize in der ökonomischen Theorie. IRIN Working Paper im Rahmen des Arbeitspakets: Smart Grid-gerechte Weiterentwicklung der Anreizregulierung," WIK Discussion Papers 349, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    5. 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.
    6. 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.
    7. Paroma Sanyal, 2005. "Powering a Green Progress: The Effect of Electricity Deregulation on Environmental Research," Industrial Organization 0504015, University Library of Munich, Germany.
    8. Dierk Bauknecht, 2011. "Incentive Regulation and Network Innovations," RSCAS Working Papers 2011/02, European University Institute.

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