Title : Electricity (De)Regulation and Innovation
Author(s) : Marianna Marino, Pierpaolo Parrotta, Giacomo Vallettaz
Abstract : In this paper we study the effect of deregulation on innovation in the electricity sector using a sample composed of 31 OECD countries. Exploiting sharp reductions in the level of product market regulation, explicitly linked to changes in the legal framework, we perform a difference-in-difference analysis by matching data retrieved from the OECD International Regulation, OECD Patent Grants, and UN World Development Indicators databases. Our main findings suggest that a decrease in regulation intensity following a significant reform has a negative impact on patents (granted by the European Patent Office), and that this impact is mainly due to the degree of market contestability. Consistent with the results of Aghion et al. , we also find evidence of an inverted U-shaped relationship between regulation and innovation. This may imply that the effect of deregulation on innovation depends on the strength of the deregulatory process.
Key-words : Regulation, patents, innovation, electricity.
JEL Classification : K23, L51, L94, O31.