The Dynamic Impacts of Pricing Groundwater

Ellen Bruno, Katrina K. Jessoe and Michael Hanemann

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: This paper evaluates own-price dynamics in taxing environmental externalities. We exploit a natural experiment that exposed some firms to a large and persistent price increase for groundwater, a setting characterized by incomplete markets. Using five years of post-treatment data on farm-level water use, we find that water conservation doubles between the first and fifth year of the tax. Failure to account for dynamics in policies designed to manage groundwater will mischaracterize the price elasticity of demand and introduce efficiency costs.

Keywords: Social and Behavioral Sciences; environmental regulation; market-based approaches; groundwater; agriculture; dynamic effects (search for similar items in EconPapers)
Date: 2023-08-16
New Economics Papers: this item is included in nep-agr, nep-env and nep-reg
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Journal Article: The Dynamic Impacts of Pricing Groundwater (2024)
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