Motivation Crowding in Peer Effects: The Effect of Solar Subsidies on Green Power Purchases

74 Pages Posted: 18 Mar 2021

Date Written: 2021

Abstract

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.

Suggested Citation

La Nauze, Andrea, Motivation Crowding in Peer Effects: The Effect of Solar Subsidies on Green Power Purchases (2021). CESifo Working Paper No. 8940, Available at SSRN: https://ssrn.com/abstract=3807003 or http://dx.doi.org/10.2139/ssrn.3807003

Andrea La Nauze (Contact Author)

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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