Analysis of the Threshold Effect of Renewable Energy Industry Subsidies Based on the Perspective of Industry Life Cycle

Huan Du, Jian Hu, Huaxuan Wu (), Tieshan Li and Lingjuan Chen
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Huan Du: School of Economics and Management, Northwest University, Xi’an 710127, China
Jian Hu: School of Economics, Xi’an University of Finance and Economics, Xi’an 710100, China
Huaxuan Wu: School of Economics, Xi’an University of Finance and Economics, Xi’an 710100, China
Tieshan Li: John Molson School of Business, Concordia University, Montreal, QC H3H 0A1, Canada
Lingjuan Chen: School of Economics and Management, Guangdong Construction Polytechnic, Guangzhou 511510, China

Sustainability, 2023, vol. 15, issue 21, 1-19

Abstract: Based on the industry life cycle theory, this study investigates the influence mechanism of renewable energy industry subsidies on industry development. Using data from 78 public Chinese electric power enterprises in the A-share market from 2011 through 2020, the threshold effect of government subsidies on the development of the renewable energy industry is empirically tested, and the heterogeneity of subsidy efficiency in the renewable energy industry is explored. The results reveal an inverted U-shaped nonlinear relationship between government subsidies and the enterprise output of the sample electric power enterprises. In addition, market investment has a positive and limited effect on enterprise output, and there is heterogeneity in subsidy efficiency and the signalling effect of subsidies on investment in the wind and photovoltaic power industries. Accordingly, we recommend that government departments use rational and flexible subsidy policy tools according to different industries, set reasonable subsidy ranges, and proactively design top-level policies that will actively broaden the application of renewable energy consumption to help industry development. By examining the overall threshold effect of electric power enterprises, this study fills a gap in the literature, as there has been scant research on the specific relationship between renewable energy industry subsidies and industry development.

Keywords: renewable energy; industry subsidies; industry life cycle; market investment; threshold effect (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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