Drought Status, Price, and the Effectiveness of Water Use Restrictions in Pennsylvania

During droughts, governments and water suppliers typically implement non-price policies to encourage water conservation. The state of Pennsylvania requests voluntary reductions in residential water use during moderate droughts and imposes mandatory restrictions during drought emergencies. This study utilizes data on household water consumption to measure the effectiveness of the water use restrictions in Pennsylvania during the moderate drought years 2015-2017. Results suggest that voluntary water use restrictions have smaller than desired effects and that the effects are larger the higher the marginal price of water, perhaps reflecting a trade-off between non-monetary benefits and the welfare loss from reducing water usage. The effectiveness of voluntary water use restrictions also is found to increase with the length of the drought.