Water Taxes and Consumer Behavior in France
18 Pages Posted: 14 Dec 2017
Date Written: February 1, 2017
Water taxes are employed to correct externalities associated with water pollution or resource scarcity and to raise government revenue. In this paper, using a dataset on more than 4,000 French municipalities, we directly examine how water taxes affect consumer behavior as distinct from tax-exclusive water prices. Our analysis shows that a 10-cent tax increase reduces water consumption by 0.26 percent, similarly to a 10-cent increase in the tax-exclusive water price. The responsiveness of consumers to tax and tax-exclusive price is important because it gives information about consumers’ sensitivity to policy interventions versus market prices.
Keywords: Externalities, Water Utilities
JEL Classification: H23, L95
Suggested Citation: Suggested Citation