American Economic Review Vol. 109 No. 6 2019

Subsidies and Time Discounting in New Technology Adoption: Evidence from Solar Photovoltaic Systems

Olivier De Groote¹; Frank Verboven²

¹ Toulouse School of Economics, University of Toulouse Capitole, 21 Allée de Brienne, 31000 Toulouse, France (email: ) · ² Department of Economics, KU Leuven, Naamsestraat 69, 3000 Leuven, Belgium, and CEPR (email: )

Abstract

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.

DOI

10.1257/aer.20161343

Volume

109

Issue

6

Pages

2137-2172

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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