Price Elasticity of Residential Water Demand and Water Scarcity
Paper presented at WINIR Conference, 2-4 September 2016, Boston, MA, The United States, with the title: "Water Saving: Do Residential Consumers Respond to Price? The Role of Informal Institutions"
Posted: 30 Jan 2018
Date Written: January 2016
The effectiveness of price as a water conservation measure remains an open empirical issue and relevant policy question. We conduct a meta-regression analysis that summarizes 615 estimates of the price elasticity of residential water demand, from 124 econometric studies. Large-sample studies have recently converged on the central result of previous meta-analyses, namely the low value of average price elasticity. However, owing to the availability of a broad dataset of studies, we single out location and community traits that boost or depress the price elasticity of residents. Our results reveal that water scarcity is a significant driver of price elasticity. More specifically, if water scarcity is harsh, residents' intrinsic motivations to save water crowd-out price measures.
Keywords: price elasticity, water demand, meta-analysis, water scarcity, environmental attitudes
JEL Classification: Q21, Q25, Q50, Q57
Suggested Citation: Suggested Citation