Technology invention and adoption in residential energy consumption: A stochastic frontier approach

- Electricity saving of efficient home appliances is analysed by means of SFA.
- Potential endogeneity in the demand frontier function is accounted for.
- Technical efficiency is correlated with policy and technology-push mechanisms.
- Invention and adoption explain the technical efficiency trend of appliances.
- Results stress the importance of supply-push and trade policies to improve EE.

In this paper we analyse the electricity consumption of a set of four traditional 'white goods' in a panel of ten EU countries observed over the period 1995-2013 with the aim of disentangling the amount of technical efficiency from overall energy saving using a stochastic frontier approach. The efficiency trend is modelled as a function of energy efficiency policies and innovation dynamics that combines invention and adoption processes using specific patents weighted by granular production data and worldwide bilateral import flows. Our model also accounts for potential endogeneity arising when innovation processes and economic growth are considered. With this replicable approach, the stochastic frontier framework allows for explicit modelling of innovation processes. Our results show that the efficiency component is related to changes in the energy efficient technological content of appliances. The 'international' component represents a predominant share of technological advancement and exerts a significant influence on the transient efficiency. Our evidence calls for an active role to be played by policy makers in focusing on innovation and trade policies in order to achieve more ambitious energy efficiency targets.