A1163
Title: Subsidy promise and anticipation effects: Evidence from electric motorcycles
Authors: Fang-Chang Kuo - National Chung Cheng University (Taiwan) [presenting]
Abstract: The aim is to examine how the anticipation of a subsidy promise made during an election campaign influences consumer behavior in durable goods markets. Leveraging the case of Taiwan's 2022 local elections, where a mayoral candidate pledged to provide free Gogoro electric motorcycles, the Synthetic Control Method is employed to construct counterfactual sales paths for both electric and gasoline-powered motorcycles. Results reveal a substantial decline in electric motorcycle registrations immediately following the policy announcement and again after the candidate's electoral victory, while gasoline motorcycle sales remain largely unaffected. This pattern indicates that the anticipated subsidy induced forward-looking consumers to delay purchases, resulting in significant intertemporal substitution. In contrast, the absence of a response in gasoline motorcycle sales suggests limited cross-category substitution. A complementary difference-in-differences analysis conducted after the policy's formal rollout in July 2023 further shows that ignoring these anticipation effects would lead to overestimated policy impacts. Together, the findings highlight the importance of accounting for implementation lags and consumer expectations in the evaluation of subsidy programs.
