Association for Public Policy Analysis & Management

Literature on the adoption and diffusion of technology has long suggested that public policy can facilitate that process. Importantly, it has typically treated policy as exogenous to the spread of innovations. Interestingly, however, the literature on policy diffusion has consistently argued that, due to electoral motivations, citizen demand for certain goods and services is an important driver of the spread of decisions to adopt statutes that facilitate access to those items. While they have developed largely independently of one another, the existence of these two streams of research raises the possibility that technology and policy diffusion are in fact endogenous to one another. In this paper, we are interested in the degree to which this insight can help us better understand the diffusion of plug-in electric vehicles (PEV) throughout the American states. To that end, we identify 26 statutes designed to ease ownership of this new technology adopted by state governments between 1990 and 2016. We also collect information on the number of PEV registrations in each state between 2010 and 2016 as a measure of existing demand. Using an instrumental variables and structural equations approaches the study tests whether PEV policy drives the spread of plug-in electric vehicles and, in turn, if the previous spread of the technology incentivizes law makers to adopt policies that make PEVs easier to own and operate. Results confirm that the diffusion of PEVs and PEV policy are endogenous to one another. We conclude with a discussion of the implications of this finding for our understanding of the uptake of this sustainable technology, as well as for the literatures on policy and technology diffusion more generally.