Household behavior related to water conservation

Abstract

Abstract This research investigates the role of the level, structure, and rate of change of water prices, as well as non-price policies and socio-demographic characteristics on households' decision-making regarding indoor and outdoor water conservation practices. In this paper, indoor water conservation choices refer to the presence/absence of low volume toilets and low flow showers in the home. Outdoor water conservation choices refer to the frequency of lawn and garden watering by the household during summer months. The former is estimated with a bivariate probit model, while the latter requires an ordered bi-variate probit model. The data come from Statistics Canada's 2006 Households and the Environment Survey. It provides a national cross-sectional sample of household-level observations on indoor and outdoor water choices. These data are linked to municipal level information on residential water prices, non-price water conservation policies, and weather information assembled by the authors. Potential endogeneity arising from the presence of price and non-price water policy variables is investigated using a simultaneous equations approach. Estimation results provide several insights. First, water prices and household characteristics play important roles in shaping household decision-making regarding both indoor and outdoor water conservation. Second, there is little evidence that non-price water conservation policies influence either indoor or outdoor decision-making. Third, there is evidence of correlation for the two indoor water-conserving choices and also for the frequency of lawn and garden watering decisions. Finally, there is no evidence of endogeneity of water prices and other policy variables.