Water Taxes and Consumer Behavior in France
Résumé
Water taxes are employed to correct externalities associated with water pollution or resource scarcity and to raise government revenue. In this paper, using a dataset on more than 4,000 French municipalities, we directly examine how water taxes affect consumer behavior as distinct from tax-exclusive water prices. Our analysis shows that a 10-cent tax increase reduces water consumption by 0.26 percent, similarly to a 10-cent increase in the tax-exclusive water price. The responsiveness of consumers to tax and tax-exclusive price is important because it gives information about consumers' sensitivity to policy interventions versus market prices.
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