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Household demand and welfare: implications of water pricing in Cyprus

Soteroula Hajispyrou, Phoebe Koundouri () and Panos Pashardes

No 201, DEOS Working Papers from Athens University of Economics and Business

Abstract: This paper considers a model of household demand for water in a theoretical framework consistent with funtamendal principles of comsumer behaviour. It applies this model to individual household data to estimate the price and income elasticities of residential demand for water in Cyprus and evaluate the welfare effects associated with changes in the water pricing system. We &nd that the current regionally heterogeneous increasing block pricing system in the island introduces gross price distortions that are not justi&ed either on efficiency or equity grounds. A shift towards uniform marginal cost pricing will eliminate the deadweight loss of the current system. However, its bene&ts will be distributed in favour of the better off households. Overall, price can be an effective tool for residential water demand management, however, it may also lead to socially undesirable distributional effects on households.

Keywords: Residential water demand; increasing block pricing; consumer welfare; water management (search for similar items in EconPapers)
JEL-codes: D D6 Q25 (search for similar items in EconPapers)
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Published in Environment and Development Economics

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Related works:
Journal Article: Household demand and welfare: implications of water pricing in Cyprus (2002) Downloads
Working Paper: Household Demand and Welfare Implications of Water Pricing in Cyprus (2002) Downloads
Working Paper: Household demand and welfare: implications of water pricing in Cyprus Downloads
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