NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Measuring Price Elasticities for Residential Water Demand with Limited Information

H. Allen Klaiber, V. Kerry Smith, Michael Kaminsky, Aaron Strong

NBER Working Paper No. 18293
Issued in August 2012
NBER Program(s):   EEE

This paper exploits the seasonal and annual changes in marginal prices for water to estimate the price elasticity of demand by residential households for water. It uses the changes in distributions of water using the census block group levels in response to changes in marginal prices of water for matched months across years. This strategy reduces the interaction effects of outdoor use and demographic fact in determining responsiveness to price. By comparing years that vary in overall water availability the framework can recover measures of how responses to price vary with season and draught conditions. The application is the urban Phoenix metropolitan area.

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