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Designing Dynamic Subsidies to Spur Adoption of New Technologies

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Listed:
  • Ashley Langer
  • Derek Lemoine

Abstract

We analyze the efficient subsidy for durable good technologies. We theoretically demonstrate that a policymaker faces a tension between intertemporally price discriminating by designing a subsidy that increases over time and taking advantage of future technological progress by designing a subsidy that decreases over time. Using dynamic estimates of household preferences for residential solar in California, we show that the efficient subsidy increases over time. The regulator's spending quintuples when households anticipate future technological progress and future subsidies.

Suggested Citation

  • Ashley Langer & Derek Lemoine, 2018. "Designing Dynamic Subsidies to Spur Adoption of New Technologies," NBER Working Papers 24310, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24310
    Note: EEE PE
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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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