The induced innovation hypothesis and energy-saving technological change

We develop a methodology for testing Hicks's induced innovation hypothesis by estimating a product-characteristics model of energy-using consumer dura bles, augmenting the hypothesis to allow for the influence of government re gulations. For the products we explored, the evidence suggests that (i) the rate of overall innovation was independent of energy prices and regulation s; (ii) the direction of innovation was responsive to energy price changes for some products but not for others; (iii) energy price changes induced ch anges in the subset of technically feasible models that were offered for sa le; (iv) this responsiveness increased substantially during the period afte r energy-efficiency product labeling was required; and (v) nonetheless, a s izable portion of efficiency improvements were autonomous.