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Water use and electricity use, which generate negative environmental externalities, are susceptible to a second externality problem: with household-level billing, each person enjoys private benefits of consumption but shares the cost with other household members. If individual usage is imperfectly observed (as is typical for water and electricity) and family members are imperfectly altruistic toward one another, households overconsume even from their own perspective. We develop this argument and test its prediction that intrahousehold free-riding dampens price sensitivity. We do so in the context of water use in urban Zambia by combining billing records, randomized price variation, and a lab-experimental measure of intrahousehold altruism. We find that more altruistic households are considerably more price sensitive than are less altruistic households. Our results imply that the socially optimal price needs to be set to correct both the environmental externality and also the intrahousehold externality.

Zonder onderwerpscode: economie

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Many agricultural and environmental technologies require large upfront investments in exchange for longer-term benefits. This time profile of costs and benefits makes adoption particularly sensitive to liquidity and credit constraints, which are prevalent in low-income settings. We test the importance of these barriers to the adoption of an agricultural technique that helps reduce land degradation and restore soil fertility in Niger. We find little evidence that liquidity or credit constraints deter adoption: instead, providing farmers with training increases the share of adopters by over 90 percentage points, whereas adding conditional or unconditional cash transfers has no additional effect. Adoption increases agricultural output, reduces land turnover and leads to adoption spillovers up to three years after treatment. These results imply that training can be a cost-effective and scalable means of promoting the adoption of profitable technologies.

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Water use and electricity use, which generate negative environmental externalities, are susceptible to a second externality problem: with household-level billing, each person enjoys private benefits of consumption but shares the cost with other household members. If individual usage is imperfectly observed (as is typical for water and electricity) and family members are imperfectly altruistic toward one another, households overconsume even from their own perspective. We develop this argument and test its prediction that intrahousehold free-riding dampens price sensitivity. We do so in the context of water use in urban Zambia by combining billing records, randomized price variation, and a lab-experimental measure of intrahousehold altruism. We find that more altruistic households are considerably more price sensitive than are less altruistic households. Our results imply that the socially optimal price needs to be set to correct both the environmental externality and also the intrahousehold externality.