Giving Green to Get Green: Incentives and Consumer Adoption of Hybrid Vehicle Technology

42 Pages Posted: 18 Mar 2008  

Kelly S. Gallagher

Harvard University - Harvard Kennedy School (HKS)

Erich Muehlegger

Harvard University - Harvard Kennedy School (HKS)

Date Written: February 1, 2008

Abstract

Federal, state and local governments use a variety of incentives to induce consumer adoption of hybrid-electric vehicles. We study the relative efficacy of state sales tax waivers, income tax credits and non-tax incentives and find that the type of tax incentive offered is as important as the value of the tax incentive. Conditional on value, we find that sales tax waivers are associated a seven-fold greater increase in hybrid sales than income tax credits. In addition, we estimate the extent to which consumer adoption of hybrid-electric vehicles (HEV) in the United States from 2000-2006 can be attributed to government incentives, changing gasoline prices, or consumer preferences for environmental quality or energy security. After controlling for model specific state and time trends, we find that rising gasoline prices are associated with higher hybrid sales, although the effect operates entirely through sales of the hybrid models with the highest fuel economy. In total, we find that tax incentives, rising gasoline prices and social preferences are associated with 6, 27 and 36 percent of high economy hybrid sales from 2000-2006.

Keywords: Business and Government Policy, Economics, Microeconomics, Environment and Natural Resources, Regulation, Science¬ł Technology and Public Policy

Suggested Citation

Gallagher, Kelly S. and Muehlegger, Erich, Giving Green to Get Green: Incentives and Consumer Adoption of Hybrid Vehicle Technology (February 1, 2008). KSG Working Paper No. RWP08-009. Available at SSRN: https://ssrn.com/abstract=1083716 or http://dx.doi.org/10.2139/ssrn.1083716

Kelly S. Gallagher

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Erich Muehlegger (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-7735 (Phone)
617-496-6886 (Fax)

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