Do Announcement and Implementation of Prices and Subsidies Differentially Affect Water Consumption

Do policy announcement and implementation of prices and subsidies have differential effect on water conservation in Singapore? Using monthly billing data on water consumption for 2.2 million residential accounts over 10 years, our difference-in-differences estimates show that the announcement of water price increase reduces water consumption by 3.7%, larger than the actual implementation of a 30% water price increase. Consumers with low water usage and price salience respond more to the announcement of price hike while consumers with high usage respond more to its implementation. An increase in low-salient utility subsidy could reduce the financial burden on low-income households without affecting water consumption. Our results suggest that the traditional market-based policy instruments, such as price and subsidy, could be combined with information salience to achieve sustainable outcomes efficiently, effectively, and fairly with minimal requirement on technology advancement and institutional innovation.