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Distributing water's bounty

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  • Griffin, Ronald C.
  • Mjelde, James W.

Abstract

Following an investigation of theoretical issues and an inventory of modeling requirements, support for increasing block rates is examined empirically, through comparison to a uniform rate that includes scarce water value. Using a single-year, monthly simulation model, it is found that under conditions of scarcity, households using smaller amounts of water are better off with a uniform rate than an increasing block. Large water users have opposing preferences. Similar results arise for those household characteristics which are correlated with water use, such as income, property value, number of residents, and outdoor area of the property. For example, low-income households prefer scarcity-inclusive uniform rates over increasing block rates when scarcity is present. Therefore, in contrast to popularized opinion, increasing block rates do not place the welfare burden of conservation on large water users, nor do such rates favor low-income people in scarce-water circumstances.

Suggested Citation

  • Griffin, Ronald C. & Mjelde, James W., 2011. "Distributing water's bounty," Ecological Economics, Elsevier, vol. 72(C), pages 116-128.
  • Handle: RePEc:eee:ecolec:v:72:y:2011:i:c:p:116-128 DOI: 10.1016/j.ecolecon.2011.09.013
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    References listed on IDEAS

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    1. Ronald C. Griffin, 2006. "Water Resource Economics: The Analysis of Scarcity, Policies, and Projects," MIT Press Books, The MIT Press, edition 1, volume 1, number 026207267x, January.
    2. 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 57-65, September.
    3. Hugh Sibly, 2006. "Efficient Urban Water Pricing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 39(2), pages 227-237, June.
    4. Richardson, James W. & Klose, Steven L. & Gray, Allan W., 2000. "An Applied Procedure For Estimating And Simulating Multivariate Empirical (Mve) Probability Distributions In Farm-Level Risk Assessment And Policy Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(02), August.
    5. 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.
    6. Roseta-Palma, Catarina & Monteiro, Henrique, 2008. "Pricing for Scarcity," MPRA Paper 10384, University Library of Munich, Germany.
    7. R. Quentin Grafton & Tom Kompas & Hang To & Michael Ward, 2009. "Residential Water Consumption: A Cross Country Analysis," Environmental Economics Research Hub Research Reports 0923, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University, revised Aug 2009.
    8. S. Gaudin, 2006. "Effect of price information on residential water demand," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 383-393.
    9. 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.
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    11. Richard E, Just & Darrell L. Heuth & Andrew Schmitz, 2004. "The Welfare Economics of Public Policy," Books, Edward Elgar Publishing, number 3342, April.
    12. Wu, Ximing & Perloff, Jeffrey M., 2007. "GMM estimation of a maximum entropy distribution with interval data," Journal of Econometrics, Elsevier, vol. 138(2), pages 532-546, June.
    13. Sylvestre Gaudin & Ronald C. Griffin & Robin C. Sickles, 2001. "Demand Specification for Municipal Water Management: Evaluation of the Stone-Geary Form," Land Economics, University of Wisconsin Press, vol. 77(3), pages 399-422.
    14. Johansson,Per-Olov, 1991. "An Introduction to Modern Welfare Economics," Cambridge Books, Cambridge University Press, number 9780521356954, March.
    15. Ronald C. Griffin & James W. Mjelde, 2000. "Valuing Water Supply Reliability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 414-426.
    16. Ziv, Bar-Shira & Finkelshtain, Israel, 1998. "The Long-Run Efficiency Of Block-Rate Pricing," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20948, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Geoff Edwards, 2006. "Whose Values Count? Demand Management for Melbourne's Water," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages 54-63, September.
    18. R. Quentin Grafton & Tom Kompas & Hang To & Michael Ward, 2009. "Residential Water Consumption: A Cross Country Analysis," Environmental Economics Research Hub Research Reports 0923, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University, revised Aug 2009.
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    1. repec:spr:waterr:v:31:y:2017:i:10:d:10.1007_s11269-017-1606-9 is not listed on IDEAS
    2. Pinto, Francisco Silva & Marques, Rui Cuhna, 2015. "Tariff recommendations: A Panacea for the Portuguese water sector?," Utilities Policy, Elsevier, vol. 34(C), pages 36-44.
    3. Rita Martins & Luis Cruz & Eduardo Barata, 2013. "Water Price Regulation: A Review of Portuguese Tariff Recommendations," Public Organization Review, Springer, vol. 13(2), pages 197-205, June.
    4. Ronald C. Griffin, 2012. "The Origins and Ideals of Water Resource Economics in the United States," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 353-377, August.

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