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Conservation policies: Who responds to price and who responds to prescription?

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  • Wichman, Casey J.
  • Taylor, Laura O.
  • von Haefen, Roger H.

Abstract

The efficiency properties of price and nonprice instruments for conservation in environmental policy are well understood. However, there is little evidence comparing the effectiveness of these instruments, especially when considering water resource management. We exploit a rich panel of residential water consumption data to examine heterogeneous responses to both price and nonprice conservation policies during times of drought while controlling for unobservable household characteristics. Our empirical models suggest that among owners of detached, single-family homes in six North Carolina municipalities, relatively low-income households are more sensitive to price and relatively high-consumption households are less sensitive to price. However, prescriptive policies such as restrictions on outdoor water use result in uniform responses across income levels, while simultaneously targeting reductions from households with irrigation systems and historically high consumption.

Suggested Citation

  • Wichman, Casey J. & Taylor, Laura O. & von Haefen, Roger H., 2016. "Conservation policies: Who responds to price and who responds to prescription?," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 114-134.
  • Handle: RePEc:eee:jeeman:v:79:y:2016:i:c:p:114-134
    DOI: 10.1016/j.jeem.2016.07.001
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    More about this item

    Keywords

    Water demand; Nonprice policies; Price regulation; Conservation; Drought;
    All these keywords.

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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