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

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  • Andrea La Nauze

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

  • Andrea La Nauze, 2021. "Motivation Crowding in Peer Effects: The Effect of Solar Subsidies on Green Power Purchases," CESifo Working Paper Series 8940, CESifo.
    • Handle: RePEc:ces:ceswps:_8940
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    Keywords

    motivation; public goods contribution; solar panels; green energy; environmental public goods;
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