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Subsidies and time discounting in technology adoption: evidence from solar photovoltaic systems

Journal Contribution - Journal Article

© 2019 American Economic Association. All rights reserved. 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.
Journal: American Economic Review
ISSN: 0002-8282
Issue: 6
Volume: 109
Pages: 2137 - 2172
Number of pages: 63
Publication year:2019