The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations

Erin Mansur and Sheila M. Olmstead

No 13513, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Rather than allowing water prices to reflect scarcity rents during periods of drought-induced excess demand, policy makers have mandated command-and-control approaches, like the curtailment of certain uses, primarily outdoor watering. Using unique panel data on residential end-uses of water, we examine the welfare implications of typical drought policies. Using price variation across and within markets, we identify end-use specific price elasticities. Our results suggest that current policies target water uses that households, themselves, are most willing to forgo. Nevertheless, we find that use restrictions have costly welfare implications, primarily due to household heterogeneity in willingness-to-pay for scarce water.

JEL-codes: L51 L95 Q25 Q28 Q58 (search for similar items in EconPapers)
Date: 2007-10
New Economics Papers: this item is included in nep-agr, nep-env and nep-reg
Note: EEE IO
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Citations: View citations in EconPapers (25)

Published as Mansur, Erin T. & Olmstead, Sheila M., 2012. "The value of scarce water: Measuring the inefficiency of municipal regulations," Journal of Urban Economics, Elsevier, vol. 71(3), pages 332-346.

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Journal Article: The value of scarce water: Measuring the inefficiency of municipal regulations (2012)
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