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Electricity (De)Regulation and Innovation

Author

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  • Marianna Marino
  • Pierpaolo Parrotta
  • Giacomo Vallettaz

Abstract

In this paper we study the effect of deregulation on innovation in the electricity sector using a sample composed of 31 OECD countries. Exploiting sharp reductions in the level of product market regulation, explicitly linked to changes in the legal framework, we perform a difference-in-difference analysis by matching data retrieved from the OECD International Regulation, OECD Patent Grants, and UN World Development Indicators databases. Our main findings suggest that a decrease in regulation intensity following a significant reform has a negative impact on patents (granted by the European Patent Office), and that this impact is mainly due to the degree of market contestability. Consistent with the results of Aghion et al. [1], we also find evidence of an inverted U-shaped relationship between regulation and innovation. This may imply that the effect of deregulation on innovation depends on the strength of the deregulatory process.

Suggested Citation

  • Marianna Marino & Pierpaolo Parrotta & Giacomo Vallettaz, 2017. "Electricity (De)Regulation and Innovation," Working Papers of BETA 2017-33, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2017-33
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    6. Michael L. Polemis & Markos Tselekounis, 2021. "Threshold effects in the regulation-innovation nexus: evidence from the telecommunications industry," Journal of Regulatory Economics, Springer, vol. 60(1), pages 74-93, August.
    7. Zhu, Chen & Xia, Yuqing & Liu, Qing & Hou, Bojun, 2023. "Deregulation and green innovation: Does cultural reform pilot project matter," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 84-105.
    8. Hu, Yefei & Liu, Dayong, 2022. "Government as a non-financial participant in innovation: How standardization led by government promotes regional innovation performance in China," Technovation, Elsevier, vol. 114(C).
    9. Michael G. Pollitt, 2019. "The European Single Market in Electricity: An Economic Assessment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 63-87, August.
    10. Agyeman, Stephen Duah & Lin, Boqiang, 2023. "Electricity industry (de)regulation and innovation in negative-emission technologies: How do market liberalization influences climate change mitigation?," Energy, Elsevier, vol. 270(C).
    11. Chen, Zhongfei & Zhang, Xiao & Chen, Fanglin, 2021. "Do carbon emission trading schemes stimulate green innovation in enterprises? Evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 168(C).
    12. Lin, Boqiang & Wesseh, Presley K., 2020. "On the economics of carbon pricing: Insights from econometric modeling with industry-level data," Energy Economics, Elsevier, vol. 86(C).
    13. Aïd, René & Bahlali, Mohamed & Creti, Anna, 2023. "Green innovation downturn: The role of imperfect competition," Energy Economics, Elsevier, vol. 123(C).
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    15. Zhang, Jianhong & Jiang, Jiangang, 2024. "Investment deregulation and innovation performance of Chinese private firms," Journal of Financial Stability, Elsevier, vol. 70(C).
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    More about this item

    Keywords

    Regulation; patents; innovation; electricity.;
    All these keywords.

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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