Skip to main content

Advertisement

Springer Nature Link
Log in
Menu
Find a journal Publish with us Track your research
Search
Cart
  1. Home
  2. Environmental and Resource Economics
  3. Article

Welfare and Distribution Effects of Water Pricing Policies

  • Open access
  • Published: 20 August 2008
  • Volume 43, pages 161–182, (2009)
  • Cite this article
Download PDF

You have full access to this open access article

Environmental and Resource Economics Aims and scope Submit manuscript
Welfare and Distribution Effects of Water Pricing Policies
Download PDF
  • Arjan Ruijs1 
  • 1851 Accesses

  • 39 Citations

  • 3 Altmetric

  • Explore all metrics

Abstract

In this paper, distribution and welfare effects of changes in block price systems are evaluated. A method is discussed to determine, for a Marshallian demand function, equivalent variation in case of a block price system. The method is applied to compare, for the Metropolitan Region of São Paulo, alternative pricing policies on the basis of their demand, welfare and distribution effects of changing water prices. Results show that there is a trade off between average welfare and income distribution. A pro-poor price system may result in lower average welfare than a flat price system, but in higher individual welfare for the poor. Moreover, there is a trade off between revenues for the water company and income distribution. Even though pro-poor price systems may not be as good for average welfare as flat price systems, their direct effects on poverty are important. Introducing pro-poor price systems, however, may have financial consequences for the water companies.

Article PDF

Download to read the full article text

Similar content being viewed by others

Achieving sustainable development goals from a water perspective: clean water pricing policy reform and consumers’ welfare in Algeria

Article 06 December 2022

The Welfare Implications of Bankruptcy Allocation of the Colorado River Water: The Case of the Salton Sea Region

Article 21 May 2020

Measuring the Impact of Water Supply Interruptions on Household Welfare

Article 23 May 2018

Explore related subjects

Discover the latest articles, books and news in related subjects, suggested using machine learning.
  • Microeconomics
  • Policy Evaluation
  • Social Policy
  • Social Choice and Welfare
  • Water Policy
  • Welfare
Use our pre-submission checklist

Avoid common mistakes on your manuscript.

References

  • Al-Qunaibet M, Johnston R (1985) Municipal demand for water in Kuwait: methodological issues and empirical results. Water Resour Res 21: 433–438

    Article  Google Scholar 

  • Anderson T (2004) Essays on nonlinear pricing and welfare. PhD Thesis, Department of Economics, Lund University, Sweden

  • Arbués F, Villanúa I (2006) Potential for pricing policies in water resource management: estimation of urban residential water demand in Zaragoza, Spain. Urban Stud 43: 2421–2442

    Article  Google Scholar 

  • Arbués F, García-Valiñas M, Martínez-Espiñeira R (2003) Estimation of residential water demand: a state- of-the-art review. J Socio-Econ 32: 81–102

    Article  Google Scholar 

  • Arbués F, Barberán R, Villanúa I (2004) Price impact on urban residential water demand: a dynamic panel data approach. Water Resour Res 40, W11402

  • Atkinson AB (1970) On the measurement of inequality. J Econ Theory 2: 244–263

    Article  Google Scholar 

  • Beattie B, LaFrance J (2006) The law of demand versus diminishing marginal utility. Rev Agric Econ 28: 263–271

    Article  Google Scholar 

  • Billings R, Agthe D (1980) Price elasticities for water: a case of increasing block rates. Land Econ 56: 73–84

    Article  Google Scholar 

  • Chicoine D, Ramamurthy G (1986) Evidence on the specification of price in the study of domestic water demand. Land Econ 79: 292–308

    Google Scholar 

  • Chipman J, Moore J (1980) Compensating variation, consumer’s surplus, and welfare. Am Econ Rev 70: 933–949

    Google Scholar 

  • Dalhuisen J, Nijkamp P (2001) Critical factors for achieving multiple goals with water tariff systems. Tech. Rep. Tinbergen Institute Discussion paper TI2001-121/3, VU

  • Deaton A (1997) The analysis of household surveys: a microeconometric approach to development policy. Johns Hopkins University Press, Baltimore

    Google Scholar 

  • Feldstein M (1972) Equity and efficiency in public sector pricing: the optimal two-part tariff. Q J Econ 86: 175–187

    Article  Google Scholar 

  • García-Valiñas M (2005) Efficiency and equity in natural resource pricing: a proposal for urban water distribution services. Environ Resour Econ 32(3): 183–204

    Google Scholar 

  • Hajispyrou S, Koundouri P, Bashardes P (2002) Household demand and welfare: implications of water pricing in cyprus. Environ Dev Econ 7: 659–685

    Article  Google Scholar 

  • Hausman J (1980) The effect of wages, taxes and fixed costs on women’s labor force participation. J Public Econ 14(2): 161–194

    Article  CAS  Google Scholar 

  • Hausman J (1981) Exact consumer’s surplus and deadweight loss. Am Econ Rev 71(4): 662–676

    Google Scholar 

  • Hausman J (1985) The econometrics of non-linear budget sets. Econometrica 53(6): 1255–1282

    Article  Google Scholar 

  • Hewitt J, Hanemann W (1995) A discrete/continuous choice approach to residential water demand under block rate pricing. Land Econ 57: 173–192

    Article  Google Scholar 

  • IBGE (2003) Pesquisa de orcamentos familiares 2002–2003. IBGE, Brasil

  • Johnston J (1984) Econometric methods. McGraw-Hill, Singapore

    Google Scholar 

  • LaFrance J (1985) Linear demand functions in theory and practice. J Econ Theory 37: 147–166

    Article  Google Scholar 

  • LaFrance J, de Gorter H (1985) Regulation in a dynamic market: the us dairy industry. Am J Agric Econ 67: 821–832

    Article  Google Scholar 

  • Mas-Colell A, Whinston M, Green J (1995) Microeconomic theory. Oxford University Press, Oxford

    Google Scholar 

  • Minnesota Population Center (2006) Integrated public use microdata series—international: Version 2.0. Tech. Rep., University of Minnesota, Minneapolis

  • Nieswiadomy M, Molina D (1989) Comparing residential water demand estimates under decreasing and increasing block rates using household data. Land Econ 65: 280–289

    Article  Google Scholar 

  • Nordin J (1976) A proposed modification of taylor’s demand analysis: comment. Bell J Econ 7(2): 719–721

    Article  Google Scholar 

  • Olmstead S, Hanemann W, Stavins R (2007) Water demand under alternative price structures. J Environ Econ Manage 54: 181–198

    Article  Google Scholar 

  • Opaluch J (1982) Urban residential demand for water in the United States: further discussion. Land Econ 58: 225–227

    Article  Google Scholar 

  • Opaluch J (1984) A test of consumer demand response to water prices: reply. Land Econ 60: 417–421

    Article  Google Scholar 

  • Reiss P, White M (2006) Evaluating welfare with nonlinear price. Tech. Rep., NBER Working Paper W12370

  • Renzetti S (1992) Evaluating the welfare effects of reforming municipal water prices. J Environ Econ Manage 22: 147–163

    Article  Google Scholar 

  • Rietveld P, Rouwendal J, Zwart B (2000) Block rate pricing of water in Indonesia: an analysis of welfare effects. Bull Indonesian Econ Stud 36(3): 73–92

    Article  Google Scholar 

  • Ruijs A, Zimmermann A, van den Berg M (2008) Demand and equity effects of water pricing policies. Ecol Econ 66: 506–516

    Article  Google Scholar 

  • Slesnick D (1998) Empirical approaches to the measurement of welfare. J Econ Lit 36(4): 2108–2165

    Google Scholar 

  • Taylor L (1975) The demand for electricity: a survey. Bell J Econ 6(1): 74–110

    Article  Google Scholar 

  • Vartia Y (1983) Efficient methods of measuring welfare change and compensated income in terms of ordinary demand functions. Econometrica 51(1): 79–98

    Article  Google Scholar 

  • Walker I, Ordoñez P, Serrano P, Halpern J (2000) Pricing, subsidies and the poor. Tech. Rep., Policy Research Working Paper No. 2468, The World Bank, Washington DC

  • Willig R (1976) Consumer’s surplus without apology. Am Econ Rev 66: 589–597

    Google Scholar 

Download references

Open Access

This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

Author information

Authors and Affiliations

  1. Environmental Economics and Natural Resources Group, Wageningen University, P.O. Box 8130, 6700 EW, Wageningen, The Netherlands

    Arjan Ruijs

Authors
  1. Arjan Ruijs
    View author publications

    Search author on:PubMed Google Scholar

Corresponding author

Correspondence to Arjan Ruijs.

Rights and permissions

Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

Reprints and permissions

About this article

Cite this article

Ruijs, A. Welfare and Distribution Effects of Water Pricing Policies. Environ Resource Econ 43, 161–182 (2009). https://doi.org/10.1007/s10640-008-9228-6

Download citation

  • Received: 31 August 2007

  • Accepted: 20 July 2008

  • Published: 20 August 2008

  • Issue Date: June 2009

  • DOI: https://doi.org/10.1007/s10640-008-9228-6

Share this article

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

Keywords

  • Water demand
  • Equivalent variation
  • Social welfare
  • Income distribution
Use our pre-submission checklist

Avoid common mistakes on your manuscript.

Advertisement

Search

Navigation

  • Find a journal
  • Publish with us
  • Track your research

Discover content

  • Journals A-Z
  • Books A-Z

Publish with us

  • Journal finder
  • Publish your research
  • Language editing
  • Open access publishing

Products and services

  • Our products
  • Librarians
  • Societies
  • Partners and advertisers

Our brands

  • Springer
  • Nature Portfolio
  • BMC
  • Palgrave Macmillan
  • Apress
  • Discover
  • Your US state privacy rights
  • Accessibility statement
  • Terms and conditions
  • Privacy policy
  • Help and support
  • Legal notice
  • Cancel contracts here

152.53.39.118

Not affiliated

Springer Nature

© 2025 Springer Nature