Working Paper: NBER ID: w25359
Authors: Erich Muehlegger; David S. Rapson
Abstract: Little is known about electric vehicle (EV) demand by low- and middle-income households. In this paper, we exploit a policy that provides exogenous variation in large EV subsidies targeted at the mass market in California. Using transaction-level data, we estimate three important policy parameters: the rate of subsidy pass-through, the impact of the subsidy on EV adoption, and the elasticity of demand for EVs among low- and middle-income households. Demand for EVs in our sample is price-elastic (-3.3) and pass-through to buyers is indistinguishable from 100 percent. We use these estimates to calculate that the expected subsidy bill required for California to reach its goal of 1.5 million EVs by 2025 is likely to exceed $12-18 billion.
Keywords: Electric Vehicles; Subsidies; Demand Elasticity; Low-Income Households; California
JEL Codes: H22; H23; H71; L62; Q48; Q55; Q58; R48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EFMP subsidies (I38) | EV adoption (O00) |
| price decrease due to subsidies (D41) | demand for EVs (R22) |
| demand for EVs (R22) | subsidy allocation needed (H20) |
| EFMP subsidies (I38) | passthrough rate (G19) |
| demand for EVs (R22) | elasticity estimates (C51) |