Advanced Search
MyIDEAS: Login to save this paper or follow this series

Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs

Contents:

Author Info

  • Henrique Monteiro

    ()
    (ISCTE-IUL - Department of Economics and UNIDE-ERC)

Abstract

The increasing popularity of increasing block tariffs (IBT) for water is reflected in Portugal by a virtually universal implementation for residential use. IBT are often supported as a good tool for achieving the goals of equity, water conservation and revenue neutrality but seldom have they been grounded on efficiency justifications. We test the conditions derived by Roseta-Palma and Monteiro (2008) for IBT to be a second-best pricing practice under water scarcity and budget balancing constraints, when consumers are heterogeneous and the fixed charge is only allowed to cover fixed costs. Because, in these conditions, the choice of tariff schedule design is dependent on the price-elasticity of demand and the way it varies with consumption levels, we estimate the Portuguese residential water demand and show that the resulting recommended tariff schedule hinges crucially on the choice of functional form. After the proper specification test, a choice between a semilogarithmic lin-log and a double-log specifications is left undecided, which does not prove the superiority of IBT, but also does not enable its dismissal. Besides the usual determinants found in the prolific residential water demand estimation literature we find that the proportion of seasonally inhabited dwellings and a reduced water quality on delivery can have a significant negative influence on the amount of water households consume.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://bru-unide.iscte.pt/RePEc/pdfs/ERCwp0110.pdf
File Function: First version, 2010
Download Restriction: no

Bibliographic Info

Paper provided by ISCTE-IUL, Business Research Unit (BRU-IUL) in its series Working Papers Series 1 with number ercwp0110.

as in new window
Length: 145 pages
Date of creation: 15 Jan 2010
Date of revision:
Handle: RePEc:isc:iscwp1:ercwp0110

Contact details of provider:
Email:
Web page: http://bru-unide.iscte.pt/
More information through EDIRC

Related research

Keywords: Water Pricing; Residential Water Demand; Increasing Block Tariffs; Choice of Functional Form; Water Quality;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Arnaud Reynaud & Céline Nauges, 2001. "Estimation de la demande domestique d'eau potable en France," Revue Économique, Programme National Persée, vol. 52(1), pages 167-185.
  2. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195060119, October.
  3. Nauges, Celine & Strand, Jon, 2007. "Estimation of non-tap water demand in Central American cities," Resource and Energy Economics, Elsevier, vol. 29(3), pages 165-182, September.
  4. Arnaud Reynaud & Alban Thomas, 2005. "Demande domestique en eau et choix de délégation. Le cas français," Revue économique, Presses de Sciences-Po, vol. 56(5), pages 1145-1168.
  5. NAUGES Céline & WHITTINGTON Dale, 2008. "Estimation of Water Demand in Developing Countries: An Overview," LERNA Working Papers, LERNA, University of Toulouse 08.20.264, LERNA, University of Toulouse.
  6. Nataraj, Shanthi & Hanemann, W. Michael, 2011. "Does marginal price matter? A regression discontinuity approach to estimating water demand," Journal of Environmental Economics and Management, Elsevier, vol. 61(2), pages 198-212, March.
  7. Bithas, Kostas, 2008. "The sustainable residential water use: Sustainability, efficiency and social equity. The European experience," Ecological Economics, Elsevier, vol. 68(1-2), pages 221-229, December.
  8. Panos Pashardes & Phoebe Koundouri & Soteroula Hajispyrou, . "Household demand and welfare: implications of water pricing in Cyprus," DEOS Working Papers 0202, Athens University of Economics and Business.
  9. Mansur, Erin T. & Olmstead, Sheila M., 2012. "The value of scarce water: Measuring the inefficiency of municipal regulations," Journal of Urban Economics, Elsevier, vol. 71(3), pages 332-346.
  10. Céline Nauges & Caroline Berg, 2009. "Demand for Piped and Non-piped Water Supply Services: Evidence from Southwest Sri Lanka," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(4), pages 535-549, April.
  11. Koji Miyawaki & Yasuihro Omori & Akira Hibiki, 2008. "Bayesian Estimation of Demand Functions under Block Rate Pricing," CIRJE F-Series CIRJE-F-568, CIRJE, Faculty of Economics, University of Tokyo.
  12. Gayatri Acharya & Edward Barbier, 2002. "Using Domestic Water Analysis to Value Groundwater Recharge in the Hadejia'Jama'are Floodplain, Northern Nigeria," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 84(2), pages 415-426.
  13. Céline Nauges & Alban Thomas, 2003. "Long-run Study of Residential Water Consumption," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(1), pages 25-43, September.
  14. Lars GÃ¥rn Hansen, 1996. "Water and Energy Price Impacts on Residential Water Demand in Copenhagen," Land Economics, University of Wisconsin Press, vol. 72(1), pages 66-79.
  15. Jasper M. Dalhuisen & Raymond J. G. M. Florax & JHenri L. F. de Groot & Peter Nijkamp, 2003. "Price and Income Elasticities of Residential Water Demand: A Meta-Analysis," Land Economics, University of Wisconsin Press, vol. 79(2), pages 292-308.
  16. Russell Davidson & James G. MacKinnon, 1981. "Tests for Model Specification in the Presence of Alternative Hypotheses: Some Further Results," Working Papers 430, Queen's University, Department of Economics.
  17. Mary E. Renwick & Sandra O. Archibald, 1998. "Demand Side Management Policies for Residential Water Use: Who Bears the Conservation Burden?," Land Economics, University of Wisconsin Press, vol. 74(3), pages 343-359.
  18. Mohamed Ayadi & Jaya Krishnakumar & Mohamed Salah Matoussi, 2002. "A Panel Data Analysis of Residential Water Demand in Presence of Nonlinear Progressive Tariffs," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 2002.06, Institut d'Economie et Econométrie, Université de Genève.
  19. David W. Carter & J. Walter Milon, 2005. "Price Knowledge in Household Demand for Utility Services," Land Economics, University of Wisconsin Press, vol. 81(2).
  20. R. A. Batchelor, 1975. "Household Technology and the Domestic Demand for Water," Land Economics, University of Wisconsin Press, vol. 51(3), pages 208-223.
  21. Monteiro, Henrique & Roseta-Palma, Catarina, 2007. "Caracterização dos tarifários de abastecimento de água e saneamento em Portugal
    [Portuguese Water Supply and Sewage Tariffs Report]
    ," MPRA Paper 4238, University Library of Munich, Germany.
  22. Ruijs, A. & Zimmermann, A. & van den Berg, M., 2008. "Demand and distributional effects of water pricing policies," Ecological Economics, Elsevier, vol. 66(2-3), pages 506-516, June.
  23. M. Babel & A. Gupta & P. Pradhan, 2007. "A multivariate econometric approach for domestic water demand modeling: An application to Kathmandu, Nepal," Water Resources Management, Springer, vol. 21(3), pages 573-589, March.
  24. Mi-Jung Um & Seung-Jun Kwak & Tai-Yoo Kim, 2002. "Estimating Willingness to Pay for Improved Drinking Water Quality Using Averting Behavior Method with Perception Measure," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(3), pages 285-300, March.
  25. S. T. Wong, 1997. "A Model on Municipal Water Demand: A Case Study of Northeastern Illinois," Land Economics, University of Wisconsin Press, vol. 48(1), pages 34-44.
  26. Krause, Kate & Chermak, Janie M & Brookshire, David S, 2003. "The Demand for Water: Consumer Response to Scarcity," Journal of Regulatory Economics, Springer, vol. 23(2), pages 167-91, March.
  27. Théophile Azomahou, 2008. "Minimum distance estimation of the spatial panel autoregressive model," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), Association Française de Cliométrie (AFC), vol. 2(1), pages 49-83, April.
  28. R. Bruce Billings & Donald E. Agthe, 1980. "Price Elasticities for Water: A Case of Increasing Block Rates," Land Economics, University of Wisconsin Press, vol. 56(1), pages 73-84.
  29. Hanemann, W. Michael & Nauges, Celine, 2005. "Heterogeneous responses to water conservation programs : the case of residential users in Los Angeles," CUDARE Working Paper Series 1026, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  30. Renwick, Mary E. & Green, Richard D., 2000. "Do Residential Water Demand Side Management Policies Measure Up? An Analysis of Eight California Water Agencies," Journal of Environmental Economics and Management, Elsevier, vol. 40(1), pages 37-55, July.
  31. Xayavong, Vilaphonh & Burton, Michael P. & White, Benedict, 2007. "Estimating Urban Residential Water-Demand with Increasing Block Prices: The Case of Perth, Western Australia," Working Papers 7061, University of Western Australia, School of Agricultural and Resource Economics.
  32. John C. Whitehead, 1995. "Willingness to Pay for Quality Improvements: Comparative Statics and Interpretation of Contingent Valuation Results," Land Economics, University of Wisconsin Press, vol. 71(2), pages 207-215.
  33. Steven Renzetti, 1999. "Municipal Water Supply and Sewage Treatment: Costs, Prices and Distortions," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 688-704, May.
  34. Roseta-Palma, Catarina & Monteiro, Henrique, 2008. "Pricing for Scarcity," MPRA Paper 10384, University Library of Munich, Germany.
  35. David Hensher & Nina Shore & Kenneth Train, 2005. "Households’ Willingness to Pay for Water Service Attributes," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(4), pages 509-531, December.
  36. Michael L. Nieswiadomy & David J. Molina, 1989. "Comparing Residential Water Demand Estimates under Decreasing and Increasing Block Rates Using Household Data," Land Economics, University of Wisconsin Press, vol. 65(3), pages 280-289.
  37. Arjan Ruijs, 2009. "Welfare and Distribution Effects of Water Pricing Policies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(2), pages 161-182, June.
  38. Thomas M. Fullerton Jr. & Ana Cecilia Nava, 2004. "Short-Term Water Dynamics in Chihuahua City, Mexico," Urban/Regional, EconWPA 0404001, EconWPA.
  39. Graeme Dandy & Tin Nguyen & Carolyn Davies, 1997. "Estimating Residential Water Demand in the Presence of Free Allowances," Land Economics, University of Wisconsin Press, vol. 73(1), pages 125-139.
  40. Schleich, Joachim & Hillenbrand, Thomas, 2009. "Determinants of residential water demand in Germany," Ecological Economics, Elsevier, vol. 68(6), pages 1756-1769, April.
  41. R. Quentin Grafton & Michael B. Ward, 2008. "Prices versus Rationing: Marshallian Surplus and Mandatory Water Restrictions," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages S57-S65, 09.
  42. Garcia, Serge & Reynaud, Arnaud, 2004. "Estimating the benefits of efficient water pricing in France," Resource and Energy Economics, Elsevier, vol. 26(1), pages 1-25, March.
  43. Rita Martins & Adelino Fortunato, 2005. "Residential water demand under block rates: a Portuguese case study," GEMF Working Papers 2005-09, GEMF - Faculdade de Economia, Universidade de Coimbra.
  44. Céline Nauges & Alban Thomas, 2000. "Privately Operated Water Utilities, Municipal Price Negotiation, and Estimation of Residential Water Demand: The Case of France," Land Economics, University of Wisconsin Press, vol. 76(1), pages 68-85.
  45. Diakité, Daouda & Semenov, Aggey & Thomas, Alban, 2009. "A proposal for social pricing of water supply in Côte d'Ivoire," Journal of Development Economics, Elsevier, vol. 88(2), pages 258-268, March.
  46. Roberto Martinez-Espineira & Celine Nauges, 2004. "Is all domestic water consumption sensitive to price control?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(15), pages 1697-1703.
  47. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
  48. Massimiliano Mazzanti & Anna Montini, 2006. "The determinants of residential water demand: empirical evidence for a panel of Italian municipalities," Applied Economics Letters, Taylor & Francis Journals, vol. 13(2), pages 107-111.
  49. Renzetti, Steven, 1992. "Evaluating the welfare effects of reforming municipal water prices," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 147-163, March.
  50. Sheila Olmstead & W. Michael Hanemann & Robert N. Stavins, 2007. "Water Demand Under Alternative Price Structures," NBER Working Papers 13573, National Bureau of Economic Research, Inc.
  51. Christopher F Baum & Steven Stillman, 1999. "DMEXOGXT: Stata module to test consistency of OLS vs XT-IV estimates," Statistical Software Components S401103, Boston College Department of Economics, revised 18 Jun 2003.
  52. R. Quentin Grafton & Tom Kompas, 2007. "Pricing Sydney water ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 227-241, 09.
  53. Serge Garcia & Alban Thomas, 2003. "Regulation of Public Utilities under Asymmetric Information," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(1), pages 145-162, September.
  54. Strand, Jon & Walker, Ian, 2005. "Water markets and demand in Central American cities," Environment and Development Economics, Cambridge University Press, vol. 10(03), pages 313-335, June.
  55. R. Martinez-Espiñeira, 2002. "Residential Water Demand in the Northwest of Spain," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(2), pages 161-187, February.
  56. Frerichs, Stephen & Becker, Nir & Easter, K. William, 1987. "Alternative Price Specification For Municipal Water Demands: An Empirical Test," Economic Reports 13033, University of Minnesota, Department of Applied Economics.
  57. Ellen M. Pint, 1999. "Household Responses to Increased Water Rates during the California Drought," Land Economics, University of Wisconsin Press, vol. 75(2), pages 246-266.
  58. Henry S. Foster, Jr. & Bruce R. Beattie, 1979. "Urban Residential Demand for Water in the United States," Land Economics, University of Wisconsin Press, vol. 55(1), pages 43-58.
  59. Michael L. Nieswiadomy & David J. Molina, 1991. "A Note on Price Perception in Water Demand Models," Land Economics, University of Wisconsin Press, vol. 67(3), pages 352-359.
  60. Piet Rietveld & Jan Rouwendal & Bert Zwart, 2000. "Block Rate Pricing of Water in Indonesia: An Analysis of Welfare Effects," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(3), pages 73-92.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:isc:iscwp1:ercwp0110. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Henrique Monteiro).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.