Working Paper: CEPR ID: DP13572
Authors: Kyle Emerick; Ujjayant Chakravorty; Manzoor Dar
Abstract: We use two randomized controlled trials in 544 villages of rural Bangladesh to study a simple water conservation technology called "Alternate Wetting and Drying (AWD)". The AWD technology is a perforated PVC pipe that allows farmers to observe the water level below ground and thus irrigate their field less often. Even though this technology has shown promising results in numerous agronomic experiments, we find no significant effects on water use and profits. AWD only leads to measurable water savings in villages where farmers pay a volumetric (marginal) price for water, but not in villages where water prices are set by the acre. Building on these findings, the second RCT randomly distributed debit cards that convert farmers from per-acre charges to hourly billing. The debit cards cause demand for AWD to become less price sensitive and farmers to put more value on the technology. Taken together, these results show that introducing a marginal price for water aligns incentives for conservation.
Keywords: Water Pricing; Conservation Technology; Agricultural Economics
JEL Codes: O13; Q25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| marginal price for water (D40) | incentives for conservation (Q28) |
| marginal price for water (D40) | perceived value of water-saving technologies (Q25) |
| AWD technology (Q16) | water use (Q25) |
| AWD technology (in villages with volumetric pricing) (R48) | water use (Q25) |
| AWD technology (in villages with volumetric pricing) (R48) | likelihood of fields being dry (Q15) |
| debit cards for hourly billing (J33) | price sensitivity of demand for AWD technology (L97) |
| debit cards for hourly billing (J33) | uptake of AWD technology (Q16) |