Network Externality and Subsidy Structure in Two-Sided Markets: Evidence from Electric Vehicle Incentives

Abstract

This paper uses new, large-scale vehicle registry data from Norway and a two-sided market framework to show nonneutrality of different subsidies and estimate their impact on electric vehicle adoption when network externalities are present. Estimates suggest a strong positive connection between electric vehicle purchases and both consumer price and charging station subsidies. Counterfactual analyses suggest that between 2010 and 2015, every dollar spent on station subsidies resulted in more than twice as many additional electric vehicle purchases than the same amount spent on price subsidies. However, this relation inverts with increased spending, as station subsidies’ impact tapers off faster. (JEL D12, D62, D85, H25, L62, Q54)