The Residential Water Demand Effect of Increasing Block Rate Water Budgets

Kenneth A. Baerenklau, Kurt A. Schwabe and Ariel Dinar


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. (JEL Q25)

This article requires a subscription to view the full text. If you have a subscription you may use the login form below to view the article. Access to this article can also be purchased.

Purchase access

You may purchase access to this article. This will require you to create an account if you don't already have one.