Welfare analysis of the subsidies in the Chinese electric vehicle industry

Xiaodan GUO, Junji XIAO

Research output: Journal PublicationsJournal Article (refereed)peer-review


We employ a structural model and counterfactual analysis to identify the impact of subsidies on the Chinese electric vehicle (EV) sales and examine their welfare effects. Our findings suggest that subsidies are effective in promoting the diffusion of domestic EVs, but may adversely affect technological advancement. When the subsidies on domestic EVs are reduced, the welfare on domestic EV consumers and producers decreases. However, the reduction in government spending on EV subsidies outweighs this private welfare loss. Thus, the overall welfare increases. Subsidies cannot be justified from the perspective of reducing externalities because they increase rather than decrease pollution.
Original languageEnglish
Pages (from-to)675-727
Number of pages53
JournalJournal of Industrial Economics
Issue number3
Early online date23 Aug 2023
Publication statusPublished - Sept 2023

Bibliographical note

Junji Xiao acknowledges supports from Faculty Research Grant provided by Lingnan University (# SSFRG/22/2/PS1) and General Research Fund provided by Research Grant Council of Hong Kong (# 13600522); Xiaodan Guo acknowledges supports from Key Project of the National Social Science Foundation of China (22AJY020) and Major Project of the Key Research Base of Humanities and Social Sciences of the Ministry of Education of China (22JJD790006).

Publisher Copyright:
© 2023 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd.

Cite this