IDEAS home Printed from https://ideas.repec.org/p/not/notgep/17-07.html
   My bibliography  Save this paper

Demand-driven technical change and productivity growth: Evidence from the US Energy Policy Act

Author

Listed:
  • Giammario Impullitti
  • Richard Kneller
  • Danny McGowan

Abstract

We study how demand shocks affect productivity by provoking technical change. Our model shows that increasing demand leads to technical change and productivity improvements through a direct market size effect and an indirect competition effect. We test the predictions using a natural experiment in the US corn industry where changes to national energy policy created exogenous increases in demand. Estimates show that the increase in demand caused technical change as corn producers adopted new technologies which in turn raised productivity by 5.7% per annum in the five years after the policy change. Although both channels are found to motivate technical change, the economic magnitude of the direct effect substantially outweighs the indirect effect.

Suggested Citation

  • Giammario Impullitti & Richard Kneller & Danny McGowan, 2017. "Demand-driven technical change and productivity growth: Evidence from the US Energy Policy Act," Discussion Papers 2017-07, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:17/07
    as

    Download full text from publisher

    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2017/2017-07.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marcus Asplund & Volker Nocke, 2006. "Firm Turnover in Imperfectly Competitive Markets -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 295-327.
    2. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    3. Kevin McNew & Duane Griffith, 2005. "Measuring the Impact of Ethanol Plants on Local Grain Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 164-180.
    4. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(3), pages 1049-1090.
    5. Daron Acemoglu & Ufuk Akcigit & Douglas Hanley & William Kerr, 2016. "Transition to Clean Technology," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 52-104.
    6. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    7. Fernandez-Cornejo, Jorge & Livingston, Michael J. & Mitchell, Lorraine & Wechsler, Seth, 2014. "Genetically Engineered Crops in the United States," Economic Research Report 164263, United States Department of Agriculture, Economic Research Service.
    8. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
    9. Paula Bustos, 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms," American Economic Review, American Economic Association, vol. 101(1), pages 304-340, February.
    10. Giammario Impullitti & Omar Licandro, 2018. "Trade, Firm Selection and Innovation: The Competition Channel," Economic Journal, Royal Economic Society, vol. 128(608), pages 189-229, February.
    11. Klaus Desmet & Stephen L. Parente, 2010. "Bigger Is Better: Market Size, Demand Elasticity, And Innovation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 319-333, May.
    12. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372, National Bureau of Economic Research, Inc.
    13. Butler, Alexander W. & Cornaggia, Jess, 2011. "Does access to external finance improve productivity? Evidence from a natural experiment," Journal of Financial Economics, Elsevier, vol. 99(1), pages 184-203, January.
    14. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-243, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giammario Impullitti & Richard Kneller & Danny McGowan, 2020. "Demand‐Driven Technical Change and Productivity Growth: Theory and Evidence FROM the Energy Policy Act," Journal of Industrial Economics, Wiley Blackwell, vol. 68(2), pages 328-363, June.
    2. Michele Battisti & Filippo Belloc & Massimo Del Gatto, 2015. "Unbundling Technology Adoption and tfp at the Firm Level: Do Intangibles Matter?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(2), pages 390-414, June.
    3. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    4. Amitabh Chandra & Amy Finkelstein & Adam Sacarny & Chad Syverson, 2016. "Health Care Exceptionalism? Performance and Allocation in the US Health Care Sector," American Economic Review, American Economic Association, vol. 106(8), pages 2110-2144, August.
    5. Çağatay Bircan & Ralph De Haas, 2020. "The Limits of Lending? Banks and Technology Adoption across Russia," The Review of Financial Studies, Society for Financial Studies, vol. 33(2), pages 536-609.
    6. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563, Elsevier.
    7. Philippe Aghion & Antonin Bergeaud & Matthieu Lequien & Marc J. Melitz, 2024. "The Heterogeneous Impact of Market Size on Innovation: Evidence from French Firm-Level Exports," The Review of Economics and Statistics, MIT Press, vol. 106(3), pages 608-626, May.
    8. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2009. "Products and Productivity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 681-709, December.
    9. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    10. Ulf Lewrick & Lukas Mohler & Rolf Weder, 2014. "When firms and industries matter: understanding the sources of productivity growth," BIS Working Papers 469, Bank for International Settlements.
    11. Liliana Varela, 2018. "Reallocation, Competition, and Productivity: Evidence from a Financial Liberalization Episode," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 1279-1313.
    12. Li, Xiaogang, 2020. "Innovation, market valuations, policy uncertainty and trade: Theory and evidence," ISU General Staff Papers 202001010800009179, Iowa State University, Department of Economics.
    13. Peter J. Klenow & Huiyu Li, 2020. "Innovative Growth Accounting," NBER Chapters, in: NBER Macroeconomics Annual 2020, volume 35, pages 245-295, National Bureau of Economic Research, Inc.
    14. Chang-Tai Hsieh & Peter J. Klenow, 2018. "The Reallocation Myth," Working Papers 18-19, Center for Economic Studies, U.S. Census Bureau.
    15. Fieler, Ana Cecília & Harrison, Ann E., 2023. "Escaping import competition in China," Journal of International Economics, Elsevier, vol. 145(C).
    16. Gnangnon, Sèna Kimm, 2023. "Do Aid for Trade flows affect Technology Licensing in Recipient Countries?," EconStor Preprints 273419, ZBW - Leibniz Information Centre for Economics.
    17. J. David Brown & Gustavo A. Crespi & Leonardo Iacovone & Luca Marcolin, 2018. "Decomposing firm-level productivity growth and assessing its determinants: evidence from the Americas," The Journal of Technology Transfer, Springer, vol. 43(6), pages 1571-1606, December.
    18. Banholzer, Nicolas & Behrens, Vanessa & Feuerriegel, Stefan & Heinrich, Sebastian & Rammer, Christian & Schmoch, Ulrich & Seliger, Florian & Wörter, Martin, 2019. "Knowledge spillovers from product and process inventions in patents and their impact on firm performance. End report," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 222367.
    19. Pilar Beneito & Paz Coscollá-Girona & María Engracia Rochina-Barrachina & Amparo Sanchis, 2015. "Competitive Pressure and Innovation at the Firm Level," Journal of Industrial Economics, Wiley Blackwell, vol. 63(3), pages 422-457, September.
    20. Teteryatnikova, Mariya, 2018. "R&D in trade networks: The role of asymmetry," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 307-350.

    More about this item

    Keywords

    demand; market size; technical change; productivity.;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:not:notgep:17/07. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hilary Hughes (email available below). General contact details of provider: https://edirc.repec.org/data/cgnotuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.