Energy prices and induced technological progress

Abstract

This study measures energy price induced technological change using directional distance function for a panel data of 55 countries over the period 1974 to 2000. The parameter estimates of directional distance function reveal the absence of neutral exogenous innovations and the presence of biased innovations either it is exogenous or energy price induced. We observe larger energy price induced technological change effects in developed countries in comparison to developing countries in the periods after first (1974), and second (1980) world oil crisis that caused substantial energy price increases. These findings concur with data that show most RDoccurs in high-income countries, particularly the US and Japan.