Asymmetric Incentives in Subsidies: Evidence from a Large-Scale Electricity Rebate Program

Koichiro Ito

American Economic Journal: Economic Policy, 2015, vol. 7, issue 3, 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)

JEL-codes: D12 D62 H76 L94 L98 Q48 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/pol.20130397
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Citations: View citations in EconPapers (56)

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Working Paper: Asymmetric Incentives in Subsidies: Evidence from a Large-Scale Electricity Rebate Program (2013)
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