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Estimating the Price Elasticity of Demand for Water with Quasi Experimental Methods


  • Klaiber, H. Allen
  • Smith, V. Kerry
  • Kaminsky, Michael
  • Strong, Aaron


There is a growing recognition in both the professional and popular literatures that water scarcity is a key policy issue that is especially important in arid, urban settings with the prospects for shortfalls in water availability due to the effects of climate change. Those evaluating these types of water problems usually conclude prices must be reformed so that incentives facing water users change to reflect this scarcity. Demand functions provide the basic economic relationships required to understand how water use will respond to such changes. This paper proposes a new method for estimating the price elasticity of demand that meets policy needs and can accommodate the presence of increasing block pricing structures.

Suggested Citation

  • Klaiber, H. Allen & Smith, V. Kerry & Kaminsky, Michael & Strong, Aaron, 2010. "Estimating the Price Elasticity of Demand for Water with Quasi Experimental Methods," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61039, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea10:61039

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    References listed on IDEAS

    1. Raj Chetty, 2009. "Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 451-488, May.
    2. Burtless, Gary & Hausman, Jerry A, 1978. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiments," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1103-1130, December.
    3. Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September.
    4. Peter C. Reiss & Matthew W. White, 2006. "Evaluating Welfare with Nonlinear Prices," NBER Working Papers 12370, National Bureau of Economic Research, Inc.
    5. Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
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