International Environmental Agreements and Directed Technological Change: Evidence from the Ozone Regime (pdf)
(Supporting Online Materials)
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Can international environmental agreements induce innovation on green technologies? It is possible that international negotiations succeed only once technological solutions are available. In this case, agreements would help diffuse such technologies rather than fostering their development. I provide the first quantitative evidence that the Montreal Protocol, and its following amendments to protect the ozone layer, triggered a large increase in research and innovation on alternatives to ozone-depleting molecules. To do this, I use the full text of patents and scientific articles to construct new panel data of the yearly number of published documents about these molecules. I implement a difference-in-differences strategy (DiD) and a synthetic control method (SCM) using hazardous air pollutants as control units. To compare molecules’ chemical and industrial characteristics, I construct descriptive variables by applying machine learning techniques to the documents’ text. The SCM estimates that the post-Montreal regime caused a 144% increase in patents and a 189% increase in articles mentioning substitutes to ozone-depleting substances; the DiD yields comparable estimates. These results challenge the view that agreements foster technological diffusion without affecting much of the dynamics of innovation. Agreements can thus encourage the development of green technologies, which importantly suggests they should be negotiated as early as possible if we hope to solve global environmental problems.
Green Product Innovation in Industrial Networks: A Theoretical Model (pdf)
with Marion Dumas (Grantham Institute).
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Previous studies have typically modeled green technological change as innovations in the process through which goods are produced (e.g., abatement technologies or energy sources). But greening the economy also requires changing the products that we use. The automotive industry, for example, needs to deploy large fleets of electric or hydrogen-based vehicles. Product manufacturing nowadays occurs within supply-chain networks, and developing new products typically requires complementary investments by suppliers. In this paper, we study the incentives for green product innovation in industrial networks and how policies can affect them. We follow the industrial organization theory of product differentiation, and model green product innovations as upgrades in product quality where inputs from suppliers are essential for upgrading quality. We show that suppliers can be innovation bottlenecks and render policy instruments less effective. An extension of the model introduces uncertainty in the direction of technological change. Here, we provide an explicit mechanism for the role of institutions that can help actors coordinate on a long-term direction of innovation. Finally, we discuss how our results help organize several findings from case studies in the automotive industry.
Learning from Unincentivized and Incentivized Communication: A Randomized Controlled Trial in India (pdf)
with Yonas Alem (University of Gothenburg).
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In order to understand the extent of the information barrier to adoption of a household technology, we designed a randomized controlled trial on willingness to pay (WTP) for solar lanterns in India. We gave high quality solar lanterns to randomly selected seed households in a non-electrified region of the state of Uttar Pradesh. Three friends of the seed were randomly assigned to one of the following three groups: control, unincentivized network and incentivized communication. We elicit WTP from the control group immediately after the seed receives the solar lantern. We elicit WTP from the friends in the unincentivized and incentivized communication groups thirty days after the seed receives the solar lantern and the friend in the incentivized communication group attends a presentation of the lantern by the seed. We show that unincetivized communication increases WTP by 90% and incentivized communication by 145% relative to the control group. We also show that learning from others is the mechanism that drives the observed WTP by peers.