  We identify and study a previously unknown systematic effect on cosmic shear
measurements, caused by the selection of galaxies used for shape measurement,
in particular the rejection of close (blended) galaxy pairs. We use ray-tracing
simulations based on the Millennium Simulation and a semi-analytical model of
galaxy formation to create realistic galaxy catalogues. From these, we quantify
the bias in the shear correlation functions by comparing measurements made from
galaxy catalogues with and without removal of close pairs. A likelihood
analysis is used to quantify the resulting shift in estimates of cosmological
parameters. The filtering of objects with close neighbours (a) changes the
redshift distribution of the galaxies used for correlation function
measurements, and (b) correlates the number density of sources in the
background with the density field in the foreground. This leads to a
scale-dependent bias of the correlation function of several percent,
translating into biases of cosmological parameters of similar amplitude. This
makes this new systematic effect potentially harmful for upcoming and planned
cosmic shear surveys. As a remedy, we propose and test a weighting scheme that
can significantly reduce the bias.
