Input efficiency as a solution to externalities – A randomized controlled trial

Abstract

Resource-conserving technologies are widely reported to benefit both the environment and the people who adopt them. Evidence for these “win-win” claims comes largely from modeling or non-experimental designs, and mostly from the energy sector. In a randomized trial of water-efficient technologies, the ex-ante engineering estimate of water use reductions was three times higher than the experimental estimate, a divergence arising from engineering and behavioral reasons other than the rebound effect. Using detailed cost information and experimentally elicited time and risk preferences, we infer that the private welfare gains from adoption are, on average, negative, implying no “efficiency paradox.”