The thesis contains three chapters relating to household and firm investment. The first chapter, coauthored with Silvia Albrizio, investigates the relationship between fiscal consolidation, business plans, and firm investment. Based on a detailed narrative of tax changes in Germany covering 40 years of fiscal adjustments, we define and exploit the exogenous variation of tax bills to quantify the effect of tax changes on firms’ future investment plans as well as on realized investment. We find that firms in the manufacturing sector revise downward both planned and realized investment subsequently to tax adjustments. Furthermore we find that income and consumption taxes are most harmful to investment and that firms base their investment plans considering laws currently under discussion, anticipating future tax changes. In the second chapter, I investigate if irreversible household investment decisions are affected by behavioral factors, namely Projection Bias (Loewenstein, O’Donoghue, and Rabin (2003)). I use detailed weather data to test if exceptional sunny months have a positive and significant impact on solar photovoltaic (PV) adoption at county level and interpret my findings as strong support for the Projection bias hypothesis given that other weather shocks (temperature, rain, and snow) do not show a significant impact. Results are robust to a wide variety of robustness checks and shock definitions. Elaborating on heterogeneity, I confirm that political ideology can play an important role in expectation formation: counties with higher share of Green voters are more perceptive to Projection Bias in their solar investment decisions. The final chapter investigates the role of economic policy for the installation of solar PV in Germany. After empirically evaluating the variables that play a key role in the household investment decision, I construct a dynamic stochastic discrete choice model of technology adoption to evaluate how different policy dimensions affect the household investment choice and aggregate technology uptake. The simulation exercise shows that an increase in the annual tariff reduction for new installations (degression rate) has the biggest negative impact on investment.