ISSN 1 746-7233, England, UK World Journal of Modelling and Simulation Vol. 6 (2010) No. 4, pp. 257-266 A new production function with technological innovation factor and its application to the analysis of energy-saving effect in LSD * Qian Liao 2 , Zhibin Wu 2 , Jiuping Xu 1,2† 1 Low-carbon Technology and Economy Research Center, Sichuan University, Chengdu 610064, P. R. China 2 Uncertainty Decision-Making Laboratory, Sichuan University, Chengdu 610064, P. R. China (Received December 10 2009, Accepted September 11 2010) Abstract. Energy and technology draw much attention these days. Against the background of low-carbon economy, the utilization of clean energy, or green energy seems irreplaceable. It’s been widely accepted that technological innovation increases energy efficiency. This paper attempts to create a new Cobb-Douglas production function and estimate the impact of technological innovation over energy saving regarding to clean energy and non-clean energy by adding technological innovation factor. We assume that technological innovation has constant growth rate. Based on the new function model, an empirical study of Leshan District (LSD) is presented and time serial data is used from 1995 ∼ 2009. The result of our study indicates that the performance of clean-energy-saving effect of technological innovation still has large room for improvement in LSD, which provides policy implication for decision makers. Keywords: Cobb-Douglas production function, clean energy, technological innovation, low-carbon econ- omy (LCE) 1 Introduction Since the birth of Cobb-Douglas production function in 1928 [5] , numerous researches have addressed this issue and contributed to production function. The main merit of original production function was that it allowed for input factors to change in magnitude in response to factor price changes, rather than fixing ratios of these inputs [10] , which makes this production function a good approximation for total production over time. However, one limitation of this production function is quite undesirable for later application to both macro- and micro-economy analysis, which is the two-factor input in this production function. Given its limitation regarding the two-factor input in explaining economic growth and the need to treat more than two factors, researchers seek to extend this production function to better explain the source of economic growth. CES (Solow) production function was introduced in 1961 by Arrow et al. [3] . Hogan and Manne [11] introduced a version wherein they embedded a Cobb-Douglas production function for capital and labour within a CES (Solow) function. There have been numerous extensions of the Cobb-Douglas and CES (Solow) production functions, such as the Variable Elasticity of Substitution (VES) function introduced by Revankar [18] and the Stone-Geary (dis- placed Cobb-Douglas) production function. A highly generalized form incorporating several elements of these was created by Fullerton [8] . Most of these newly-formed production functions address different issues given different phases of economic and social development. For energy economist, what they interest most is the energy efficiency gains over energy consumption with technological progress over time. Intensive researches have addressed the relationship between technological innovation and energy consumption. Maria [17] used a stochastic frontier production function model to analyze the energy efficiency of Spanish industry given * This research was supported by the Key Program of NSFC (Grant No.70833005). † Corresponding author. Tel.: +86 28 85418522. E-mail address: xujiuping@scu.edu.cn. Published by World Academic Press, World Academic Union