On the sources of technological change: Assessing the evidence

This paper uses a selective review of the economic literature on technological change to support four points that are important for interpreting and incorporating technological change into formal models of energy and the environment. The review (1) supports the notion that no single source dominates the process of technological change. It supports roles for R&D and learning-by-doing within an industry, as well as for spillovers from other industries engaged in both of these activities. The literature also (2) supports a strong role for spillovers; (3) indicates that these spillovers are often indirect, requiring own-industry activities to utilize; and (4) indicates that simple experience curve calibrations often used in formal models likely include a range of sources of technological change in addition to learning-by-doing, some of which might not be induced by the sorts of policies typically considered in the climate context.