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Estimating the benefits of efficient water pricing in France

Author

Listed:
  • Serge S. Garcia

    (GEA - Gestion de l'eau et de l'assainissement - ENGREF - Ecole Nationale du Génie Rural, des Eaux et des Forêts)

  • Arnaud Reynaud

    (LERNA - Economie des Ressources Naturelles - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives)

Abstract

The purpose of this paper is to evaluate the pricing of French water utilities. An econometric model describing both water supply and demand is specified and estimated on utilities located in the Bordeaux area. Based on the estimated technology and demand parameters, we simulate marginal-cost pricing (first-best pricing) and social surplus variations. We find a significant difference between observed marginal prices and marginal costs. We show that the optimal pricing scheme is characterized, first by higher marginal prices and second by a lower fixed charge. However, moving towards efficient prices does not result in important direct welfare effects.

Suggested Citation

  • Serge S. Garcia & Arnaud Reynaud, 2004. "Estimating the benefits of efficient water pricing in France," Post-Print hal-02682580, HAL.
    • Handle: RePEc:hal:journl:hal-02682580
    DOI: 10.1016/j.reseneeco.2003.05.001
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