Explaining Non-Take-up of Water Subsidy.docVIP

Water 2011, 3, 1174-1196; doi:10.3390/w3041174 OPEN ACCESS water ISSN 2073-4441 /journal/water Article Explaining Non-Take-up of Water Subsidy Momi Dahan 1,* and Udi Nisan 2 1 School of Public Policy, The Hebrew University of Jerusalem, Mount Scopus, Jerusalem 91905, Israel 2 Kennedy School of Government, Harvard University, 79 John F. Kennedy Street, Cambridge, MA 02138, USA; E-Mail: Udi_Nisan@ * Author to whom correspondence should be addressed; E-Mail: momidahan@mscc.huji.ac.il; Tel.: +972-2-5883709; Fax: +972-2-5880047. Received: 10 March 2011; in revised form: 9 July 2011 / Accepted: 9 December 2011 / Published: 16 December 2011 Abstract: We use two separate quasi-natural experiments to explore the relative importance of information and administrative costs in explaining non-take-up of water subsidy. The first “experiment” shows that the take-up rate of a household with lower administrative costs is not significantly different from otherwise identical households. In contrast, using the same program, the second “experiment” reveals that the take-up rate of a household that is more likely to be informed is substantially higher compared to otherwise identical households. These findings support the idea that information plays a major role in explaining non-take-up of water subsidy. Keywords: water subsidy; take-up; information costs; administrative costs JEL Classifications: I38 1. Introduction In a recent survey on the explanations for low take-up of social benefits Currie [1] has concluded that “after many years of research, we still have relatively little insight into precisely what types of cost matter most.” Low take-up rate occurs across countries as well as social programs. Estimates of the extent of take-up of social benefits, including our case, range between 40 and 80 percent [2].  Water 2011, 3 1175 A standard cost-benefits model suggests that eligible households would apply if the expected benef