Date of Award

Summer 2024

Language

English

Embargo Period

7-26-2024

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

College/School/Department

Department of Economics

Program

Economics

First Advisor

Cuicui Chen

Committee Members

Daiqiang Zhang, Michael Jerison, Chun-Yu Ho

Keywords

Water Infrastructure, United States, Regulator Preferences, Investment

Subject Categories

Environmental Studies | Industrial Organization

Abstract

The infrastructure of U.S. drinking water systems faces chronic issues of low quality and underinvestment. As the water utilities in the U.S. are typically managed and regulated at the local municipal level, investment levels depend on the municipal regulator's preferences. Drawing from a dynamic framework, I specify and estimate the local regulators' objective function over drinking water infrastructure investment. This framework highlights the tradeoff between profit and consumer surplus and reveals how regulator preferences can deviate from net surplus optimization, resulting in underinvestment. My findings provide significant evidence that the drinking water infrastructure is underinvested. I reveal that the regulator's higher preference weight on utility profit over consumer surplus leads to a social welfare loss of 38 thousand dollars per utility per year. My counterfactual analyses proposes two policy strategies to fix this loss, including subsidies for water utility and technological advancements.

License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

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