American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Asymmetric Incentives in Subsidies: Evidence from a Large-Scale Electricity Rebate Program
American Economic Journal: Economic Policy
vol. 7,
no. 3, August 2015
(pp. 209–37)
Abstract
Many countries use substantial public funds to subsidize reductions in negative externalities. Such policy designs create asymmetric incentives because increases in externalities remain unpriced. I investigate the implications of such policies by using a regression discontinuity design in California's electricity rebate program. Using household-level panel data, I find that the incentive produced precisely estimated zero treatment effects on energy conservation in coastal areas. In contrast, the rebate induced short-run and long-run consumption reductions in inland areas. Income, climate, and air conditioner saturation significantly drive the heterogeneity. Finally, I provide a cost-effectiveness analysis and investigate how to improve the policy design. (JEL D12, D62, H76, L94, L98, Q48)Citation
Ito, Koichiro. 2015. "Asymmetric Incentives in Subsidies: Evidence from a Large-Scale Electricity Rebate Program." American Economic Journal: Economic Policy, 7 (3): 209–37. DOI: 10.1257/pol.20130397Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D62 Externalities
- H76 State and Local Government: Other Expenditure Categories
- L94 Electric Utilities
- L98 Industry Studies: Utilities and Transportation: Government Policy
- Q48 Energy: Government Policy
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