Technical Change and Industrial Dynamics as Evolutionary Processes

This work prepared for B. Hall and N. Rosenberg (eds.) Handbook of Innovation, Elsevier (2010), lays out the basic premises of this research and review and integrate much of what has been learned on the processes of technological evolution, their main features and their effects on the evolution of industries. First, we map and integrate the various pieces of evidence concerning the nature and structure of technological knowledge the sources of novel opportunities, the dynamics through which they are tapped and the revealed outcomes in terms of advances in production techniques and product characteristics. Explicit recognition of the evolutionary manners through which technological change proceed has also profound implications for the way economists theorize about and analyze a number of topics central to the discipline. One is the theory of the firm in industries where technological and organizational innovation is important. Indeed a large literature has grown up on this topic, addressing the nature of the technological and organizational capabilities which business firms embody and the ways they evolve over time. Another domain concerns the nature of competition in such industries, wherein innovation and diffusion affect growth and survival probabilities of heterogeneous firms, and, relatedly, the determinants of industrial structure. The processes of knowledge accumulation and diffusion involve winners and losers, changing distributions of competitive abilities across different firms, and, with that, changing industrial structures. Both the sector-specific characteristics of technologies and their degrees of maturity over their life cycles influence the patterns of industrial organization ? including of course size distributions, degrees of concentration, relative importance of incumbents and entrants, etc. This is the second set of topics which we address. Finally, in the conclusions, we briefly flag some fundamental aspects of economic growth and development as an innovation driven evolutionary process.Innovation, Technological paradigms, Technological regimes and trajectories, Evolution, Learning, Capability-based theories of the firm, Selection, Industrial dynamics, Emergent properties, Endogenous growth

The early diffusion of smart meters in the US electric power industry

The impact of new technologies within and across industries is only felt through their widespread diffusion, yet studies of technology diffusion are scarce compared to other aspects of the innovation process. The electric power industry is one industry that is currently undergoing substantial change as a result of both technological and institutional innovations. In this dissertation I examine the economic rationale for the adoption of smart meters by electric power utilities and the relationship between smart meters and the evolving electric power industry. I contribute to empirical research on technology diffusion by studying the early diffusion of smart meters in the US electric power industry. Using a panel dataset and econometric models, I analyze the determinants of both the interfirm and intrafirm diffusion of smart meters in the United States. The empirical findings suggest multiple drivers of smart meter diffusion. Policy and regulatory support have had a significant, positive impact on adoption but have not been the only relevant determinants. The findings also suggest that utility characteristics and some combination of learning, cost reductions, and technology standards have been important determinants affecting smart meter diffusion. I also explore the policy implications resulting from this analysis for enhancing the diffusion of smart meters. The costs and benefits of adopting smart meters have been more uncertain than initially thought, suggesting that some policy support for adoption was premature. The coordination of policies is also necessary to achieve the full benefits of using smart meters

The Value of Flexibility in the Italian Water Service Sector: A Real Option Analysis

We analyze the optimal investment strategy of a monopolist which has subscribed a concession contract to provide a public utility, i.e. water service. We present a strategic model in which a monopolist chooses both the timing of the investment and the capacity. We focus not only on the value of the immediate investment, but rather on the value of the investment opportunity. We then extend the model to two interdependent projects, where investing in the first project provides the opportunity to acquire the benefits of the new investment by making a new outlay. We show that flexibility to defer an investment may generate, ceteris paribus, additional profits which may induce positive effects in terms of policy and consumers surplus.Irreversible investment, Flexibility to defer, Capacity expansion choice

Modelling Dynamic Conditional Correlations in WTI Oil Forward and Futures Returns

This paper estimates the dynamic conditional correlations in the returns on WTI oil one-month forward prices, and one-, three-, six-, and twelve-month futures prices, using recently developed multivariate conditional volatility models. The dynamic correlations enable a determination of whether the forward and various futures returns are substitutes or complements, which are crucial for deciding whether or not to hedge against unforeseen circumstances. The models are estimated using daily data on WTI oil forward and futures prices, and their associated returns, from 3 January 1985 to 16 January 2004. At the univariate level, the estimates are statistically significant, with the occasional asymmetric effect in which negative shocks have a greater impact on volatility than positive shocks. In all cases, both the short- and long-run persistence of shocks are statistically significant. Among the five returns, there are ten conditional correlations, with the highest estimate of constant conditional correlation being 0.975 between the volatilities of the three-month and six-month futures returns, and the lowest being 0.656 between the volatilities of the forward and twelve-month futures returns. The dynamic conditional correlations can vary dramatically, being negative in four of ten cases and being close to zero in another five cases. Only in the case of the dynamic volatilities of the three-month and six-month futures returns is the range of variation relatively narrow, namely (0.832, 0.996). Thus, in general, the dynamic volatilities in the returns in the WTI oil forward and future prices can be either independent or interdependent over time.Constant conditional correlations, Dynamic conditional correlations, Multivariate GARCH models, Forward prices and returns, Futures prices and returns, WTI oil prices

Sustainable consumption: towards action and impact. : International scientific conference November 6th-8th 2011, Hamburg - European Green Capital 2011, Germany: abstract volume

This volume contains the abstracts of all oral and poster presentations of the international scientific conference „Sustainable Consumption – Towards Action and Impact“ held in Hamburg (Germany) on November 6th-8th 2011. This unique conference aims to promote a comprehensive academic discourse on issues concerning sustainable consumption and brings together scholars from a wide range of academic disciplines. In modern societies, private consumption is a multifaceted and ambivalent phenomenon: it is a ubiquitous social practice and an economic driving force, yet at the same time, its consequences are in conflict with important social and environmental sustainability goals. Finding paths towards “sustainable consumption” has therefore become a major political issue. In order to properly understand the challenge of “sustainable consumption”, identify unsustainable patterns of consumption and bring forward the necessary innovations, a collaborative effort of researchers from different disciplines is needed

On the Road to a Unified Market for Energy Efficiency: The Contribution of White Certificates Schemes

White certificates schemes mandate competing energy companies to promote energy efficiency with flexibility mechanisms, including the trading of energy savings. So far, stylized facts are lacking and outcomes are mainly country-specific. By comparing results of British, Italian and French experiences, we attempt to identify the core determinants of their performances. We show that (i) white certificates schemes are depicted in theoretical works as mandatory subsidies on energy efficiency goods recovered by an end-use energy tax, whereby white certificates exchanges are not a central feature; (ii) at current stages, existing schemes are cost-effective and economically efficient, with large discrepancies though; (iii) the hybrid subsidy-tax mechanism seems valid but conditional to cost pass through permissions; otherwise, obliged energy companies merely promote information on the “downstream” side (i.e. at the consumer level); (iv) although white certificates exchange between different types of actors involved can be important as in Italy, trade among obliged companies is negligible; instead, flexibility sustains vertical relationships between obliged parties and “upstream” partners (i.e. installers, energy service companies). In this respect, we support the view that white certificates schemes are a policy instrument of multi-functional nature (subsidisation, information, technology diffusion), whose static and dynamic efficiency depends upon the consistency between a proper definition of long-term energy savings, the appropriate cost-recovery permission and a fine coordination with other instruments. We finally propose a four stages deployment pattern, along which fragmented markets for energy efficient technologies get closer to create a unified market delivering energy efficiency as a homogeneous good.White Certificates Schemes, Static Efficiency, Dynamic Efficiency, Vertical Organisation, Policy Coordination

Optimal Transfers and Participation Decisions in International Environmental Agreements

The literature on international environmental agreements has recognized the role transfers play in encouraging participation in international environmental agreements (IEAs), but the few results achieved so far are overly specific and do not exploit the full potential of transfers for successful treaty-making. Therefore, in this paper, we develop a framework that enables us to study the role of transfers in a more systematic way. We propose a design for transfers using both internal and external financial resources and making “welfare optimal agreements” self-enforcing. To illustrate the relevance of our transfer scheme for actual treaty-making, we use a well-known integrated assessment model of climate change to show how appropriate transfers may be able to induce almost all countries into signing a self-enforcing climate treaty.Self-enforcing international environmental agreements, Climate policy, Transfers

Complexity and the Economics of Climate Change: a Survey and a Look Forward

URL des Documents de travail : http://ces.univ-paris1.fr/cesdp/cesdp2016.htmlDocuments de travail du Centre d'Economie de la Sorbonne 2016.58 - ISSN : 1955-611XWe provide a survey of the micro and macro economics of climate change from a complexity science perspective and we discuss the challenges ahead for this line of research. We identify four areas of the literature where complex system models have already produced valuable insights: (i) coalition formation and climate negotiations, (ii) macroeconomic impacts of climate-related events, (iii) energy markets and (iv) diffusion of climate-friendly technologies. On each of these issues, accounting for heterogeneity, interactions and disequilibrium dynamics provides a complementary and novel perspective to the one of standard equilibrium models. Furthermore, it highlights the potential economic benefits of mitigation and adaptation policies and the risk of under-estimating systemic climate change-related risks

Bargaining with Non-Monolithic Players

This paper analyses strategic bargaining in negotiations between non-monolithic players, i.e. agents starting negotiations can split up in smaller entities during the bargaining process. We show that the possibility of scission in the informed coalition implies that it loses its information advantages. We also show that when the possibility of a scission exists the uninformed player does not focus on his or her beliefs about the strength of the informed coalition but on the proportion of weak/strong players within this coalition. Finally, our results show that the possibility of a scission reduces the incentives for the leader to propose a high offer to ensure a global agreement. We apply this framework to international negotiations on global public goods and to wage negotiations.Strategic bargaining, Non-monolithic players, Scission, Noncooperative game-theory

Energy Regulation, Roll Call Votes and Regional Resources: Evidence from Russia

This paper investigates the relative impact of regional energy production on the legislative choices of Russian Duma deputies on energy regulation between 1994 and 2003. We apply Poole’s optimal classification method of roll call votes using an ordered probit model to explain energy law reform in the first decade of Russia’s democratic transition. Our goal is to analyze the relative importance of home energy on deputies’ behavior, controlling for other factors such as party affiliation, electoral mandate, committee membership and socio-demographic parameters. We observe that energy resource factors have a considerable effect on deputies’ voting behavior. On the other hand, we concurrently find that regional economic preferences are constrained by the public policy priorities of the federal center that continue to set the tone in energy law reform in post-Soviet Russia.Energy Regulation, Energy Roll Law Reform, Energy Resources, Roll Call Votes, Legislative Politics, State Duma, Russia