Inefficient Water Pricing and Incentives for Conservation
American Economic Journal: Applied Economics
vol. 15,
no. 1, January 2023
(pp. 319-50)
Abstract
Farmers often buy water using fixed fees—rather than with marginal prices. We use two randomized controlled trials in Bangladesh to study the relationship between marginal prices, adoption of a water-saving technology, and water usage. Our first experiment shows that the technology only saves water when farmers face marginal prices. Our second experiment finds that an encouragement to voluntarily convert to hourly pumping charges does not save water. Taken together, efforts to conserve water work best when farmers face marginal prices, but simply giving an option for marginal pricing is insufficient to trigger water-saving investments and reduce irrigation demands.Citation
Chakravorty, Ujjayant, Manzoor H. Dar, and Kyle Emerick. 2023. "Inefficient Water Pricing and Incentives for Conservation." American Economic Journal: Applied Economics, 15 (1): 319-50. DOI: 10.1257/app.20210011Additional Materials
JEL Classification
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q15 Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
- Q16 Agricultural R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
- Q25 Renewable Resources and Conservation: Water
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