Green Neighbors, Greener Neighborhoods: Peer Effects in Residential Green Investments

Abstract

Utilizing a nearest-neighbor research design, I find that households exposed to green neighbors within 0.1 miles are 1.6 times more likely to make their homes green within a year than unexposed households. The exposure also increases the likelihood of multi-property owners certifying their faraway secondary properties green, emphasizing that information from neighbors, not neighborhood characteristics alone, drives the effect. While higher green home prices, electricity savings, and regulatory incentives strengthen the peer effect, pro-environmental household preferences do not. An information-cost-based discrete choice model explains the findings and suggests that aligning green subsidies with peer effects can accelerate residential green investments.

Keywords: Household Residential Green Investments, Causal Neighborhood Peer Effects, Nearest-Neighbor Design

JEL Classification: D12, D14, G51, Q54, R23, R31