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The Residential Water Demand Effect of Increasing Block Rate Water Budgets

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Listed:
  • Kenneth A. Baerenklau
  • Kurt A. Schwabe
  • Ariel Dinar

Abstract

We investigate the effect of introducing a fiscally neutral increasing block rate water budget price structure on residential water demand. We estimate that demand was reduced by around 17%, although the reduction was achieved gradually over more than three years. As intermediate steps we derive estimates of price and income elasticities that rely only on longitudinal variability. We investigate how different subpopulations responded to the pricing change and find evidence that marginal, rather than average, prices may be driving consumption. We also derive alternative rate structures that might have been implemented, and assess their estimated demand effects.

Suggested Citation

  • Kenneth A. Baerenklau & Kurt A. Schwabe & Ariel Dinar, 2014. "The Residential Water Demand Effect of Increasing Block Rate Water Budgets," Land Economics, University of Wisconsin Press, vol. 90(4), pages 683-699.
    • Handle: RePEc:uwp:landec:v:90:y:2014:i:4:p:683-699
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    References listed on IDEAS

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    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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