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

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

Essays on Interconnected Markets

This dissertation empirically studies the economic effects of interdependent decision-making within social and financial networks in three distinct settings. Chapter 1 investigates whether the allocative inefficiency in a price-controlled market is more pronounced when decision makers are influenced by their social environment. For the renewable energy production in Germany, we find that existing solar panels in a municipality increase the probability of further installations, even in areas with minimal solar radiation. We conclude that a market-based mechanism could have led to a more cost-effective deployment of subsidies. Chapter 2 investigates the role of crowding---the degree to which a portfolio correlates with competitors' investments---for performance in the global active mutual fund market. Using a novel fund-level measure, we show that highly crowded portfolios underperform passive funds by 0.11% monthly. This underperformance stems largely from overexposure to liquid equities, potentially as a precaution against contagion risks. Chapter 3 examines dealer banks' intermediation in European repo markets under regulatory-induced asset scarcity. We show that dealers re-use collateral to alleviate scarcity, but this increases systemic risk through the sudden withdraw of collateral. This finding highlights a trade-off between shock absorption and systemic liquidity risks

Minimum Prices and Social Interactions: Evidence from the German Renewable Energy Program

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

Freiheit durch Vernunft? Ordnung und Ziel der menschlichen Gesellschaft nach Johann Gottlieb Fichte

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Die Diözesankurie als Mittel des Apostolats

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