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Heterogeneous Responses to Water Conservation Programs: The Case of Residential Users in Los Angeles

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  • Hanemann, W. Michael
  • Nauges, Celine

Abstract

We propose a detailed analysis of heterogeneity in households’ responses to water conservation programs (price increase, voluntary and mandatory conservation) during periods of water shortage. Using a unique dataset covering water consumption of all residential users in Los Angeles (California) during the drought (1988-1992), we show that households generally were responsive to the conservation measures but that the magnitude of households’ responses varies depending on the instrument and on households’ characteristics, in particular the size of their lot. Price elasticity is estimated between –0.29 and –0.47 in the high season (June-October), and between 0 and –0.19 in the low season (November-May). Results suggest that the voluntary conservation program [resp. mandatory conservation program] induced a reduction in water use which varies from 1 to 13% [resp. 21% to 29%] depending on the season and the size of the lot. The achieved reduction in consumption is however very similar across households. These data also allow us to compare the effectiveness of price and nonprice policies in terms of water savings. Finally, welfare calculations suggest that households with the smallest lot sizes (and lowest income) suffered the greatest loss during the implementation of the water conservation programs.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt1s43k3fd.

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Date of creation: 25 Aug 2005
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Handle: RePEc:cdl:agrebk:qt1s43k3fd

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Related research

Keywords: water conservation; residential use; heterogeneity in behavior; panel data.;

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  1. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
  2. Ellen Hanak, 2005. "Water for Growth: California's New Frontier," PPIC Research Reports, Public Policy Institute of California, number wtrgth.
  3. Jasper M. Dalhuisen & Raymond J. G. M. Florax & JHenri L. F. de Groot & Peter Nijkamp, 2003. "Price and Income Elasticities of Residential Water Demand: A Meta-Analysis," Land Economics, University of Wisconsin Press, vol. 79(2), pages 292-308.
  4. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Roberto Martinez-Espineira & Celine Nauges, 2004. "Is all domestic water consumption sensitive to price control?," Applied Economics, Taylor & Francis Journals, vol. 36(15), pages 1697-1703.
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Cited by:
  1. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).

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