MANAGING DEMAND FOR SCARCE WATER RESOURCES: AN EVALUATION OF CURRENT APPROACHES

Increasing water scarcity due to droughts and competition for water resources is threatening the ability of cities all over the world, even those that are well-resourced, to provide their residents with basic water services. My three-paper dissertation addresses three different areas of intervention aimed at addressing water scarcity. In my first paper, I address incentives to create technologies that address water scarcity. Concerns of a “deficit” of water-related technologies question the widely held belief that we can innovate our way out of water crises. In the context of the United States, I exploit temporal and spatial variation in the incidence of drought and the implementation of water technology clusters to explain changes in water-related patenting activity. I find that patenting activity does not increase following droughts, which suggests few incentives to innovate exist. I do find that water technology clusters boost water-related innovation, suggesting that additional policy interventions may be warranted. In my second paper, I provide insights into price-based rationing for managing residential water demand, an increasingly popular demand management tool. The efficacy and distributional impacts of this approach depends on households’ heterogeneous price sensitivity. I estimate heterogenous price responses for single family households in Chapel Hill, NC using a household-level panel dataset that features a large change in marginal water prices and a novel measure of local hydrological stress. Contrary to prior research, I find households with presumably strong preferences for irrigation are no less price sensitive than other households. In my third paper, I examine water utility compliance with state-imposed mandates for water conservation during severe droughts. States use mandates as a policy intended to address conflicting incentives for conservation by water utilities. Using data on urban water utilities in California subjected to a year-long mandate, I provide evidence that mandating higher conservation objectives does not lead to water utilities increasing water conservation. Moreover, I show that compliance is higher for water utilities where customers actively complain about “water waste.” In this context, private citizen activism appears to be an overlooked aspect of local agency compliance.Doctor of Philosoph