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Institutional, geographic, and facility factors affecting differences in prices for wastewater services

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  • Suho Bae
  • Sheldon Gen
  • Seong-Gin Moon

Abstract

The provision of wastewater services is an important infrastructure service that affects social welfare. It improves the quality of community life by promoting sanitary conditions and minimizing the negative impact of wastewater on ecosystems. The price for this important public service, however, varies considerably across regions and localities. In this paper, we examine the physical factors and institutional characteristics that affect wastewater service prices across regions and localities. Our major concerns are the following: (1) institutional arrangements and characteristics of a wastewater utility, (2) government regulations, (3) supply factors and characteristics, and (4) natural environments and local characteristics. To analyze the price differences, we employ the demand and price equations for wastewater services using a simultaneous equations framework. For empirical estimation, we utilize a seemingly unrelated regression (SUR) method to account for the correlations between the residuals in the four price equations for wastewater services. Our empirical results are that the institutional arrangement of services, including monthly charges (versus bi-monthly or quarterly charges), provision of other infrastructure services in addition to wastewater services, and long-term debt, explain much of the price difference. In addition, the wastewater prices are influenced by state environmental regulations as well as supply factors, such as the number of wastewater treatment plants and infiltration and inflow into the sewer system. Interestingly, local geographic and meteorologic factors that were hypothesized to affect the selection of treatment processes were not found to be associated with price. These findings suggest ways wastewater services might be offered at lower prices for users. Copyright Springer-Verlag 2012

Suggested Citation

  • Suho Bae & Sheldon Gen & Seong-Gin Moon, 2012. "Institutional, geographic, and facility factors affecting differences in prices for wastewater services," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(3), pages 767-788, December.
    • Handle: RePEc:spr:anresc:v:49:y:2012:i:3:p:767-788
    DOI: 10.1007/s00168-011-0441-9
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Q25; Q27; Q21; C31;
    All these keywords.

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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