NBER

Sarojini V. Rao

Department of Economics
University of Chicago
5757 S. University Avenue
Chicago, IL 60637

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Chicago

NBER Working Papers and Publications

January 2018Environmental Externalities and Free-riding in the Household
with Kelsey Jack, Seema Jayachandran: w24192
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 consid...

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