The Welfare Cost of Non-Price Rationing: Evidence from an Urban Water Market (Job Market Paper)

The Problem. How do we distribute essential resources when supply is fixed and prices are regulated? Traditional rationing (intermittent supply) creates hidden inefficiencies. I analyzed how alternative market designs – such as flexible pricing or capacity quotas – could improve efficiency and equity.

The Approach.

• Causal Inference: Leveraged a spatial discontinuity (natural experiment) in the supply network to identify causal effects.
• Structural Modeling: Built an equilibrium model of household demand to estimate hidden user costs (shadow prices) that administrative data misses.
• Large-Scale Data: Processed the universe of meter-level billing data (900k+ users) combined with novel survey data.

Key Findings.

• The “Reliability Tax”: The status quo of intermittent supply acts as a regressive tax. Low-income users spend a disproportionate share of expenditure on private storage technology to cope with unreliability.
• Policy Counterfactuals: Simulations show that transitioning to market-clearing prices or smart quotas would reduce the welfare loss, effectively “refunding” the wasted storage costs back to consumers.