Motivation Crowding in Peer Effects: The Effect of Solar Subsidies on Green Power Purchases
CESifo, Munich, 2021
CESifo Working Paper No. 8940
![](https://cesifo.org/DocImg/cesifo1_wp8940.jpg?c=1689236962)
I test whether economic incentives dampen peer effects in public-good settings. I study how a visible and subsidized contribution to a public good (installing solar panels) affects peer contributions that are neither subsidized nor visible (electing green power). Exploiting spatial variation in the feasibility of installing solar panels, I find that panels increase voluntary purchases of green power by neighbors. However, using sharp changes in government incentives over time, I find that the magnitude of the spillover depends on the level of subsidies to solar. The results support the hypothesis that signals drive peer responses to visible public-good contributions and that economic incentives blur those signals.
Energy and Climate Economics
Behavioural Economics