Evaluating Targeted Subsidies

This note dicusses the value of targeting in the context of technology adoption subsidies. Whenever agents are heterogeneous in their impact on others, targeting subsidies to those who have the greatest externality will improve the impact of subsidies. However, the relevant information needed for efficient targeting may sometimes be private. We describe incentive compatible methods to target subsidies on such private information. Drawing on the existing literature, we clarify what type of private information may be extracted, and how it may be useful for targeting.

Chassang, S., Dupas, P., Snowberg, E. (2016) "Evaluating Targeted Subsidies" Ferdi Policy brief B161, septembre 2016