Advancing economic research on the Inflation Reduction Act: Q&A with Susan Helper
The Inflation Reduction Act of 2022 is the most significant economic and clean energy jobs program the United States has ever initiated. To improve overall understanding of whether the new law has been effective in achieving its economic policy goals, the Washington Center for Equitable Growth is engaging with policymakers and academics to discuss evaluation and research opportunities that have emerged since its implementation. Through the release of our Request for Proposals: The economic effects of the Inflation Reduction Act, our goal is to stimulate new research on the law’s impact on local and regional labor markets, job creation, innovation, and investment.
The Inflation Reduction Act included a variety of policy tools, such as tax credits, competitive grant programs, and loans. It is essential to understand which tool or set of tools were most effective at spurring innovation and investment and improving outcomes at the intersection of decarbonization and equitable economic growth. To that end, we asked Susan Helper—the Frank Tracy Carlton Professor of Economics at Case Western Reserve University, former senior advisor for industrial strategy at the White House Office of Management and Budget, former senior economist at the Council of Economic Advisers, and former chief economist at the U.S. Department of Commerce—what scholars should consider when designing research on the distributional economic outcomes of the Inflation Reduction Act.
The Q&A below is intended to serve as a resource for academics seeking to sharpen their research questions on the law and its impact. The conversation touched upon the following main themes:
- Examining the effects of the Inflation Reduction Act
- Industrial policy design and implementation
- The innovation-to-commercialization pipeline
Examining the effects of the Inflation Reduction Act
Equitable Growth: What key indicators can researchers use to quantify the long-term economic effects of IRA-driven investments?
Sue Helper: There are a variety of potential impacts of IRA-driven investments, not all of which fit into a macro or fiscal bucket.
Starting with the macro implications, green investments may have significant impacts on business cycles. Research by Elizabeth Klee of the Federal Reserve Board, Adair Morse at University of California, Berkeley, and Chaehee Shin also of the Federal Reserve shows that defaults on car loans for electric vehicles are lower, even after controlling for borrower characteristics, due in part to the fact that EVs are not affected by gas price volatility. Similarly, Harvard University’s Elaine Buckberg has suggestive evidence that more electrification would reduce the magnitude of business cycles because electricity prices are more stable than gas prices. She also argues that this would remain true with a switch to more renewables, even if they are intermittent.
Ideally, we would want to see impact on greenhouse gas emissions, though it may take some time for these impacts to become apparent. John Bistline and co-authors lay out some of the emissions and energy impacts of the law in a recent Science article, for example. As we wait for more data to emerge on emissions, we should look for intervening variables, such as investment in green technology manufacturing and adoption of such technologies, among other indicators.
In addition, we would hope to see that IRA provisions on job quality and training lead to better jobs. For guidance there, Equitable Growth recently released a resource guide on how to best evaluate the law’s effect on job quality, spillovers, and place-based policymaking.
Equitable Growth: What data gaps or other challenges exist in assessing the Inflation Reduction Act’s effectiveness at attracting private investment and understanding the impact of those investments across supply chains?
Helper: Bistline and his co-authors summarize helpfully, writing that “several implementation challenges are difficult to model, including the scale-up of supply chains and materials, siting and permitting, infrastructure expansion, network effects, non-cost barriers to consumer uptake of incentives, and the economic incidence of subsidies.” Researchers should look at these specific challenges with case studies. Such studies could analyze both where implementation went well and where it didn’t go so well.
Econometric examinations of particular provisions of the law also would be informative, such as whether delegation to states leads to slower implementation and/or better long-run success due to attention to local conditions. And research that focuses on the impact of policies complementary to the Inflation Reduction Act—for example, convening or government procurement—would be of great interest to policymakers.
Key to the design of the Inflation Reduction Act was the idea that policy could “crowd in” private investment due to factors such as de-risking emerging technologies, achieving economies of scale, increasing certainty of demand, accelerating learning curves and building network effects, addressing externalities (such as climate impacts), and solving coordination problems. The law did indeed generate large commitments of private investment. Research could examine the magnitude of these effects by looking both at particular industries targeted by the law and at particular policy levers (for example, grants, loans, or tax credits).
It would be useful to understand interactions of individual provisions of the Inflation Reduction Act with other IRA provisions and with other policies. In my time in government, I found information failures even among firms to be very large, especially for small firms. It would be good to research improved ways of convening and/or providing integrated services as suggested here (in general) and here (for the case of EVs).
It also would be useful to understand incidence within supply chains. Well-publicized incentives to consumer-facing firms were largely passed on to consumers. Yet it’s not clear that incentives to lead firms were passed on to suppliers, or that lead firms (e.g., in autos or heat pumps) provided much assistance—financial or otherwise—to help suppliers with forecasting, capital, or training costs of scaling up to provide a new product. This research would be hard because the prices of components are typically not public but would be especially useful. In studying resilience and incidence, it’s important to go beyond simply “mapping” supply chains, to analyze the nature of ties between supplier and customer.
Industrial policy design and implementation
Equitable Growth: What policy design features of the Inflation Reduction Act are most important for researchers seeking to study the intersection of efficiency, equitable economic outcomes, and lower emissions?
Helper: Some key choices that could be examined are tax credits versus loans versus grants; tech-neutral credits (which can promote innovation) versus industry-specific credits (which can drive certainty in that industry, promoting investment); and the role of Community Benefits Plans—roadmaps for how developers engage with and benefit communities affected by infrastructure projects—and whether they slowed investment and/or promoted good outcomes, including for business, by drawing resources toward building a skilled workforce.
There is some variation in the ways that the Inflation Reduction Act and other programs administered by the U.S. Department of Energy conceive of and incentivize Community Benefits Plans. For example, the $2 billion fund for retooling existing auto plants provided points for adopting various high-road business practices inside plants, while other programs focused on benefits to residents near plants.
Research could examine the effects of these provisions on selection of recipients, performance of recipients on various metrics, and long-lasting impacts, if any.
Equitable Growth: How can we apply lessons from the Inflation Reduction Act to understand whether to leverage industrial strategy to address other pressing global or national challenges?
Helper: Policymakers need to understand how IRA implementation and coordination actually worked and build on any successes. The impact of the law will be due to not just the policies in the bill, but also to the process of writing guidance and building cooperation across agencies.
For example, the U.S. Treasury Department knows how to administer tax policy and drive stakeholder engagement, increasing benefit uptake with states, localities, Tribal governments, nonprofits, and industry. Amid IRA implementation, the Treasury Department learned to cooperate with the U.S. Department of Labor to implement provisions around apprenticeships and prevailing wages and with the U.S. Department of Energy on the state of clean energy manufacturing and greenhouse gas emissions. It also had to learn from the private sector about conflicts and complementarities around goals such as defining domestic content and incentivizing increased job quality, about convening experts and potential recipients to design the guidance and to build awareness of policies, and more.
Equitable Growth: What natural experiments, innovative data methods, or structural modeling can inform the development of industrial strategy theory, along with the design and implementation of future policies?
Helper: Mixed methods approaches are great. Researchers also should not overlook the power of case studies; modelers should look out for bottlenecks, information issues, and market power, to name a few, that affect incidence of incentives, and also look out for nonlinear, self-reinforcing effects.
It’s helpful if researchers can understand the dynamics of the industries they study. For example, Stanford University’s Hunt Allcott and his co-authors find that the Inflation Reduction Act could have reduced greenhouse gas emissions more efficiently if it offered greater incentives for smaller vehicles. While it is very useful to understand the magnitude of the effect (which is large), they do not point out the impact of such a policy on job quality, given decades of trade and labor policies that have led unionized U.S. companies to focus on large vehicles.
Strengthening the innovation-to-commercialization pipeline
Equitable Growth: What examples have you seen where regional and state differences in infrastructure, labor markets, and policy environments are affecting the success of clean energy commercialization efforts? How can early examples or case studies be used in research designs to inform a broader understanding of the effectiveness of IRA design and outcomes?
Helper: The deployment of electric vehicle chargers is an important case to study. Although funded under the Bipartisan Infrastructure Law passed in 2021, the slow roll out of EV chargers affected the demand for these vehicles, a key IRA target. There was wide variation in state performance. Indeed, Ohio deployed the first National Electric Vehicle Infrastructure charger in December 2023, yet some states had still not deployed any by March 2025.
Equitable Growth: What policy levers should researchers focus on to understand and enhance the Inflation Reduction Act’s intent to deploy new technologies at scale, drive down costs, and enable the technologies to ultimately reach full market acceptance?
Helper: Researchers should understand (and help investors understand) how climate goals affect other goals that private investors care about, such as lead time and supply chain resilience. Similarly, research can, and is beginning to, look at impacts on utility bills and the distributional impact of any changes.
Equitable Growth: What data and metrics from the innovation-to-commercialization pipeline could be used to refine future policies for equitable clean energy growth?
Helper: Ideally, granular, high-frequency data on both supply and demand for new technologies would be great. It’s important to understand what supply chains and demand factors drive these.
In contrast, modelers were too quick to assume we were on the steep portion of the S-curve of adoption for electric vehicles. Yet part of this slowdown in acceleration of demand was due to policy issues, such as the slow roll out of chargers, as discussed above.
We hope this Q&A helps researchers sharpen their questions and approaches to studying the economic implications of the Inflation Reduction Act. Learn more about our current funding opportunity through Equitable Growth’s Request for Proposals: The economic effects of the Inflation Reduction Act.
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