Estimating water demand using price differences of wastewater services

RESEARCH PAPERS ARE PRELIMINARY MATERIALS CIRCULATED TO STIMULATE DISCUSSION AND CRITICAL COMMENT. THE VIEWS EXPRESSED ARE THOSE OF THE INDIVIDUAL AUTHORS.

Many homes in Hawai‘i use cesspools and other on-site disposal systems (OSDS) instead of the municipal sewer system. Because bills combine water and waste-water services, and homes with OSDS do not pay for sewer service, OSDS residences have lower monthly bills compared to those with sewer-connected systems. We use this price difference in conjunction with selection on observables and matching methods to estimate the price elasticity of residential water demand. Matching methods indicate that OSDS residences have systematically different characteristics than those with sewer-connected systems, suggesting an imperfect natural experiment.

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