Designing Dynamic Subsidies to Spur Adoption of New Technologies

69 Pages Posted: 4 Jun 2018

See all articles by Ashley Langer

Ashley Langer

University of Arizona

Derek Lemoine

University of Arizona - Department of Economics

Date Written: February 2018

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.

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Suggested Citation

Langer, Ashley and Lemoine, Derek, Designing Dynamic Subsidies to Spur Adoption of New Technologies (February 2018). NBER Working Paper No. w24310. Available at SSRN: https://ssrn.com/abstract=3189953

Ashley Langer (Contact Author)

University of Arizona ( email )

Derek Lemoine

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

HOME PAGE: http://www.dereklemoine.com/

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