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Does Economic Growth Matter? Technology-Push, Demand-Pull and Endogenous Drivers of Innovation in the Renewable Energy Industry

Author

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  • Aflaki, Sam
  • Masini , Andrea
Abstract
The paper aims to contribute to the longstanding technology-push vs. demand-pull debate and to the literature on renewable energy diffusion and renewable energy policy assessment. The authors argue that in addition to the traditional push-pull dichotomy, the drivers of technological change must be differentiated by whether they are exogenous or endogenous to the economic system. They maintain that a specific type of endogenous demand-pull mechanism (i.e. economic growth) is a major catalyst of environmental innovation. We apply this perspective to study the diffusion of renewable energy (RE) technologies in 15 European Union countries from 1990 to 2012. Applying different panel data estimators, the authors find that public R&D investments, policies supporting RE and per capita income all have a positive impact on RE diffusion, whereas the variability of policy support has a negative impact. However, they also find that economic growth is a stronger driver than either public R&D investments or policies supporting RE, and that models that do not take it explicitly into account tend to overestimate the importance of exogenous drivers. Most importantly, they note that the effect of economic growth on RE diffusion exhibits a nonlinear, U-shaped pattern that resonates with the well-known Environmental Kuznets Curve hypothesis. RE penetration remains negligible at low levels of growth whereas it increases sharply only after income per capita has reached a given threshold and the demand for environmental quality rises. Their findings have implications for policy making. They suggest that for RE diffusion to increase, government action should be directed not only at shielding renewables from competition with fossil fuel technologies but also at stimulating aggregated demand and economic growth.

Suggested Citation

  • Aflaki, Sam & Masini , Andrea, 2014. "Does Economic Growth Matter? Technology-Push, Demand-Pull and Endogenous Drivers of Innovation in the Renewable Energy Industry," HEC Research Papers Series 1070, HEC Paris.
    • Handle: RePEc:ebg:heccah:1070
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    Citations

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    Cited by:

    1. Lei Jin & Keran Duan & Xu Tang, 2018. "What Is the Relationship between Technological Innovation and Energy Consumption? Empirical Analysis Based on Provincial Panel Data from China," Sustainability, MDPI, vol. 10(1), pages 1-13, January.
    2. Theerasak Nitlarp & Supaporn Kiattisin, 2022. "The Impact Factors of Industry 4.0 on ESG in the Energy Sector," Sustainability, MDPI, vol. 14(15), pages 1-19, July.
    3. Basher, Syed Abul & Masini, Andrea & Aflaki, Sam, 2015. "Time series properties of the renewable energy diffusion process: Implications for energy policy design and assessment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1680-1692.
    4. Sam, Aflaki & Syed Abul, Basher & Andrea, Masini, 2019. "Is your valley as green as it should be? Incorporating economic development into environmental performance indicators," MPRA Paper 97081, University Library of Munich, Germany.
    5. Jan L. Bednarczyk & Katarzyna Brzozowska-Rup & Sławomir Luściński, 2021. "Determinants of the Energy Development Based on Renewable Energy Sources in Poland," Energies, MDPI, vol. 14(20), pages 1-21, October.
    6. Lee, Jungwoo & Yang, Jae-Suk, 2019. "Global energy transitions and political systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 115(C).
    7. Zheng-Xia He & Shi-Chun Xu & Qin-Bin Li & Bin Zhao, 2018. "Factors That Influence Renewable Energy Technological Innovation in China: A Dynamic Panel Approach," Sustainability, MDPI, vol. 10(1), pages 1-30, January.

    More about this item

    Keywords

    Deployment policy; Technological innovation; Renewable Energy; Environmental Kuznets Curve; Nonstationary Panel;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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