John Van Reenen (London School of Economics)
Abstract: Do industrial policies that promote clean energy offer a “ray of hope” increasing a country’s economic growth and welfare whilst simultaneously reducing carbon emissions? We study the impact of Chinese solar subsidies whose implementation by cities coincided with a dramatic fall in global solar prices. We construct new panel data on city-level solar policies, patenting and output. Using synthetic-difference-in-differences between 2004-2020, we find that production and innovation subsidies were more effective than demand-side (installation) subsidies in generating large and persistent increases in local innovation, firm numbers, output and exports. However, demand policies most strongly reduce local pollution. We build and estimate a spatial general equilibrium model with endogenous innovation, heterogeneous productivity across firms and place that takes into account business stealing and knowledge spillovers. Structural quantification of this model shows that: (i) the local effects remain substantial at the aggregate level; (ii) policy explains almost two-fifths of the price decline of solar panels and a third of the increase in Chinese innovation; (iii) solar industrial policies increased Chinese welfare by 1% to 2.3%, almost as much as existing estimates of WTO Accession; and (iv) although all subsidy types increase aggregate welfare, innovation subsidies are by far the most cost-effective.
You can find John's website here: Bio | Mysite
He will be available for individual meetings on the day of the seminar. Giulia and Yihan will coordinate the schedule. Please use the following Google sheet if you want to reserve a slot: Research Seminar SoSe 26