Using Price Elasticities of Water Demand to Inform Policy

Ellen Bruno and Katrina Jessoe ()
Additional contact information
Katrina Jessoe: Department of Agricultural and Resource Economics, University of California, Davis, California 95616, USA

Annual Review of Resource Economics, 2021, vol. 13, issue 1, 427-441

Abstract: This survey distills recent work on the price elasticity of demand for urban and agricultural water and outlines how it can inform the design of market-based approaches to manage increasingly scarce water resources. We offer a brief description of the water sector, including the primary users, main water sources, and market failures in the allocation and use of surface water and groundwater. A review of recent empirical research on the price elasticities of agricultural and urban water demand shows the progress made in our understanding of user response to prices and reveals substantial heterogeneity in the price response. We apply what we have learned about elasticities to surface water markets and price-based groundwater management. Heterogeneity in price elasticities suggests that water transfers may lead to large efficiency gains, but that their magnitude is site specific. Groundwater pricing may cost-effectively manage groundwater and fund the development of alternative water supplies, but heterogeneity in elasticity estimates highlights that the conservation and revenue generated are basin specific.

Keywords: water resources; market-based approaches; climate change; price elasticity (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1146/annurev-resource-110220-104549
Full text downloads are only available to subscribers. Visit the abstract page for more information.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:anr:reseco:v:13:y:2021:p:427-441

Ordering information: This journal article can be ordered from
http://www.annualreviews.org/action/ecommerce

DOI: 10.1146/annurev-resource-110220-104549

Access Statistics for this article

More articles in Annual Review of Resource Economics from Annual Reviews Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA.
Bibliographic data for series maintained by http://www.annualreviews.org ().