RT Journal Article
SR Electronic
T1 The Residential Water Demand Effect of Increasing Block Rate Water Budgets
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 683
OP 699
DO 10.3368/le.90.4.683
VO 90
IS 4
A1 Baerenklau, Kenneth A.
A1 Schwabe, Kurt A.
A1 Dinar, Ariel
YR 2014
UL http://le.uwpress.org/content/90/4/683.abstract
AB 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)