Does social interaction make bad policies even worse? Evidence from renewable energy subsidies


Inhoffen, Justus ; Siemroth, Christoph ; Zahn, Philipp


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URL: https://ub-madoc.bib.uni-mannheim.de/40977
URN: urn:nbn:de:bsz:180-madoc-409776
Document Type: Working paper
Year of publication: 2016
The title of a journal, publication series: Working Paper Series
Volume: 16-09
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > VWL, Wirtschaftspolitik (Grüner)
MADOC publication series: Department of Economics > Working Paper Series
Subject: 330 Economics
Classification: JEL: H23 , L14 , Q42 , Q48 , Q58,
Keywords (English): EEG , Minimum Prices , Peer Effects , Public Policy , Renewable Energy , Social Interaction , Social Effect , Social Multiplier , Solar Power , Solar Panels , Subsidy
Abstract: Minimum prices above the market level can lead to ineffcient production and oversupply. We investigate whether this effect is even more pronounced when decision makers are influenced by their social environment. Using data of minimum prices for renewable energy production in Germany, we analyze if individual decisions to install solar panels are affected by the investment decisions of others. We implement a propensity score matching routine on municipality level and estimate that existing panels in the municipality increase the probability and number of further installations considerably, even in areas with minimal solar potential. This social effect is stronger in areas with more solar potential and less unemployment. A higher number of existing panels and more concentrated installations increase the social effect further. We discuss policy implications of these social effects.

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Inhoffen, Justus ; Siemroth, Christoph ; Zahn, Philipp (2016) Does social interaction make bad policies even worse? Evidence from renewable energy subsidies. Open Access Working Paper Series Mannheim 16-09 [Working paper]
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