Subsidies and Time Discounting in New Technology Adoption

De Groote, Olivier and Verboven, Frank (2019) Subsidies and Time Discounting in New Technology Adoption: Evidence from Solar Photovoltaic Systems. American Economic Review (AER), vol. 109 (n° 6). pp. 2137-2172.

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We study a generous program to promote the adoption of solar photovoltaic (PV) systems through subsidies on future electricity production, rather than through upfront investment subsidies. We develop a tractable dynamic model of new technology adoption, also accounting for local market heterogeneity. We identify the discount factor from demand responses to variation that shifts expected future but not current utilities. Despite the massive adoption, we find that households significantly discounted the future benefits from the new technology. This implies that an upfront investment subsidy program would have promoted the technology at a much lower budgetary cost.

Item Type: Article
Sub-title: Evidence from Solar Photovoltaic Systems
Language: English
Date: 2019
Refereed: Yes
JEL codes: C51 - Model Construction and Estimation
Q48 - Government Policy
Q58 - Government Policy
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 15 Jan 2019 13:11
Last Modified: 28 Jun 2019 09:30

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