Are Economic Tools Useful to Manage Residential Water Demand? A Review of Old Issues and Emerging Topics

Abstract

The analysis of residential water demand has long attracted attention from researchers. However, the central topics at issue have evolved considerably, transitioning from estimating price and income elasticities to using experimental techniques that assess how to motivate households towards water conservation. In this literature review, we contribute to the existing literature by giving an updated overview of the state of the art in the central topics regarding residential water demand. Moreover, we present some interesting lines of research to be explored in the future. Thus, we first review some traditional key drivers of residential water demand. Second, we discuss the role of public policies when managing residential water demand, paying special attention to pricing tools. Next, we briefly review some of the methodological issues with respect to traditional econometrics and discuss related modeling. We then discuss the role of experimental designs and nudging on residential water use. Finally, we include a summary of the main literature findings, and close the discussion introducing some emerging and promising research topics.