Abstract
Minimum prices above the competitive level can lead to allocative inefficiencies. We investigate whether this effect is more pronounced when decision makers are influenced by their social environment. Using data of minimum prices for renewable energy production in Germany, we test if individual decisions to install photovoltaic systems are affected by the investment decisions of others in the area. 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 radiation. Thus, social interaction can add secondary inefficiencies to the known allocative problems of minimum prices. The social interaction effect is stronger in areas with more solar radiation and less unemployment. A larger number of existing systems and more concentrated installations increase the social effect further.
| Original language | English |
|---|---|
| Pages (from-to) | 350-364 |
| Number of pages | 15 |
| Journal | Energy Economics |
| Volume | 78 |
| Early online date | 6 Dec 2018 |
| DOIs | |
| Publication status | Published - Feb 2019 |
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Keywords
- Feed-in tariffs
- Neighborhood effects
- Peer effects
- PV systems
- Renewable energy
- Solar energy
- Subsidies
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Minimum prices and social interactions : Evidence from the German renewable energy program. / Inhoffen, Justus; Siemroth, Christoph; Zahn, Philipp.
In: Energy Economics, Vol. 78, 02.2019, p. 350-364.Research output: Contribution to Journal › Article › Academic › peer-review
TY - JOUR
T1 - Minimum prices and social interactions
T2 - Evidence from the German renewable energy program
AU - Inhoffen, Justus
AU - Siemroth, Christoph
AU - Zahn, Philipp
PY - 2019/2
Y1 - 2019/2
N2 - Minimum prices above the competitive level can lead to allocative inefficiencies. We investigate whether this effect is more pronounced when decision makers are influenced by their social environment. Using data of minimum prices for renewable energy production in Germany, we test if individual decisions to install photovoltaic systems are affected by the investment decisions of others in the area. 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 radiation. Thus, social interaction can add secondary inefficiencies to the known allocative problems of minimum prices. The social interaction effect is stronger in areas with more solar radiation and less unemployment. A larger number of existing systems and more concentrated installations increase the social effect further.
AB - Minimum prices above the competitive level can lead to allocative inefficiencies. We investigate whether this effect is more pronounced when decision makers are influenced by their social environment. Using data of minimum prices for renewable energy production in Germany, we test if individual decisions to install photovoltaic systems are affected by the investment decisions of others in the area. 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 radiation. Thus, social interaction can add secondary inefficiencies to the known allocative problems of minimum prices. The social interaction effect is stronger in areas with more solar radiation and less unemployment. A larger number of existing systems and more concentrated installations increase the social effect further.
KW - Feed-in tariffs
KW - Neighborhood effects
KW - Peer effects
KW - PV systems
KW - Renewable energy
KW - Solar energy
KW - Subsidies
UR - http://www.scopus.com/inward/record.url?scp=85058395460&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85058395460&partnerID=8YFLogxK
U2 - 10.1016/j.eneco.2018.11.034
DO - 10.1016/j.eneco.2018.11.034
M3 - Article
VL - 78
SP - 350
EP - 364
JO - Energy Economics
JF - Energy Economics
SN - 0140-9883
ER -