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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