Price- and Policy-Induced Innovations: The Case of U.S. Biofuel

By: Jang, Heesun; Du, Xiaodong


Jang, Heesun; Du, Xiaodong, Price- and Policy-Induced Innovations: The Case of U.S. Biofuel, Journal of Agricultural and Resource Economics, Volume 38, Issue 3, December 2013, Pages 299-311

Using patent counts and citation data from 1977 to 2011, we explore the determining factors of innovative activities of the U.S. biofuel industry.We take into account both demand-side factors— such as crude-oil price, government R&D expenditure on biofuel, and federal-level support policies—and supply-side factors, represented by constructed knowledge stocks, to quantify the effects on biofuel-related innovations. The citation generation process is quantified using patent citation records and the estimates are used to construct the simple and weighted stocks of knowledge with weights of patent productivity. We confirm that both the demand and supply factors have positive and statistically significant effects on technological biofuel innovations in the United States.