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http://ssrn.com/abstract=875439
 
 

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


Erin T. Mansur


Dartmouth College - Dartmouth Economics Department; National Bureau of Economic Research (NBER)

Sheila M. Olmstead


Yale University - School of Forestry and Environmental Studies

January 2006

AEI-Brookings Joint Center Working Paper No. 06-01

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.

Number of Pages in PDF File: 43

Keywords: Resource Allocation, Market-based Regulation, Residential Water Demand, Drought Policy

JEL Classification: I30, D10

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Date posted: January 13, 2006  

Suggested Citation

Mansur, Erin T. and Olmstead, Sheila M., The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations (January 2006). AEI-Brookings Joint Center Working Paper No. 06-01. Available at SSRN: http://ssrn.com/abstract=875439 or http://dx.doi.org/10.2139/ssrn.875439

Contact Information

Erin T. Mansur (Contact Author)
Dartmouth College - Dartmouth Economics Department ( email )
Hanover, NH 03755
United States
603 646 2531 (Phone)
603 646 2122 (Fax)
HOME PAGE: http://www.dartmouth.edu/~mansur/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Sheila M. Olmstead
Yale University - School of Forestry and Environmental Studies ( email )
New Haven, CT 06511
United States
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