EconPapers    
Economics at your fingertips  
 

Environmental Externalities and Free-riding in the Household

B. Kelsey Jack, Seema Jayachandran and Sarojini Rao

No 24192, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Water use and electricity use, which generate negative environmental externalities, are susceptible to a second externality problem: with household-level billing, each person enjoys private benefits of consumption but shares the cost with other household members. If individual usage is imperfectly observed (as is typical for water and electricity) and family members are imperfectly altruistic toward one another, households overconsume even from their own perspective. We develop this argument and test its prediction that intrahousehold free-riding dampens price sensitivity. We do so in the context of water use in urban Zambia by combining billing records, randomized price variation, and a lab-experimental measure of intrahousehold altruism. We find that more altruistic households are considerably more price sensitive than are less altruistic households. Our results imply that the socially optimal price needs to be set to correct both the environmental externality and also the intrahousehold externality.

JEL-codes: D10 H21 H23 O10 Q56 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
Date: 2018-01
Note: DEV EEE PE
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w24192.pdf (application/pdf)

Related works:
Working Paper: Environmental externalities and free-riding in the household (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:24192

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w24192

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-10-23
Handle: RePEc:nbr:nberwo:24192