Peer Effects in (Hybrid) Electric Vehicle Adoption

Abstract

I study peer effects in the diffusion of electric vehicles in Sweden. To identify peer effects, I use a shift-share IV design that links the timing of peers` leasing contract renewals with their estimated probability of adopting an electric vehicle. I study three types of peer groups; co-workers, family members, and neighbors. One new electric vehicle causes, in the next quarter, an additional .077 new electric vehicle acquisitions in the workplace, .014 in the family, and .111 in the neighborhood. This is not due to intertemporal substitution of future planned purchases but reflects a persistent increase in demand for electric vehicles. The peer-driven adoption of electric vehicles largely crowds out demand for diesel and petrol vehicles. The observed peer effects are aligned with an information transmission mechanism about leasing a new electric vehicle. Finally, I document how the empirical findings can inform the design of optimal environmental policies in the presence of peer effects.