Arbeitspapier
Water tariff setting and its welfare implications: Evidence from cities in the People's Republic of China
We develop a framework to analyze urban water tariff setting and its welfare implications and apply it to a panel of cities in the People's Republic of China in the 2000s. First, we find that peer cities' water tariff levels have a significant influence on a city's choice of tariffs. We use the peer cities' average tariff as an instrumental variable to estimate water demand functions, which yields elasticity estimates of around − 0.41 for both residential and industrial sectors. Second, estimation of cost functions reveals the supply of urban water services to be characterized by strong economies of scale with the majority of sample city− years on the downward sloping segment of marginal cost curves. More than half of the sample have residential water tariffs higher than the corresponding marginal costs while the share increases to 71% for the industrial sector. The deadweight loss calculated under first-best pricing suggests moderate welfare loss due to prices deviating from the equilibrium. Finally, we show that taking into account nonrevenue water losses justifies an efficient price higher than the equilibrium price.
- Language
-
Englisch
- Bibliographic citation
-
Series: ADB Economics Working Paper Series ; No. 580
- Classification
-
Wirtschaft
Gas Utilities; Pipelines; Water Utilities
Renewable Resources and Conservation: Demand and Supply; Prices
Renewable Resources and Conservation: Water
Renewable Resources and Conservation: Government Policy
- Subject
-
deadweight loss
multiproduct cost function
nonrevenue water
water demand
water tariff
- Event
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Geistige Schöpfung
- (who)
-
Jiang, Yi
Calub, Renz Adrian T.
Zheng, Xiaoting
- Event
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Veröffentlichung
- (who)
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Asian Development Bank (ADB)
- (where)
-
Manila
- (when)
-
2019
- DOI
-
doi:10.22617/WPS190159-2
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Jiang, Yi
- Calub, Renz Adrian T.
- Zheng, Xiaoting
- Asian Development Bank (ADB)
Time of origin
- 2019
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