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Title:Increasing block tariffs in the water sector: a semi-welfarist approach PDF Logo
Authors:Meran, Georg
von Hirschhausen, Christian R.
Issue Date:2009
Series/Report no.:Discussion papers // German Institute for Economic Research 902
Abstract:We analyze the properties of progressive water tariffs that are often applied in the sector in the form of discretely increasing block tariffs (IBT). We are particularly interested in water tarification in a poverty context where a subsistence level of water has to be allocated to each household. Our approach is semi-welfarist to the extent that we analyze second-best pricing schemes that may be applied in practice due to fairness or other, non-welfarist considerations. In our theoretical model we compare a modified Coase-tariff and a progressively increasing block tariff with respect to water consumption, water expenses and utility levels. When we impose cost coverage on the water utility, there are clearly adverse effects on the almost poor by introducing a progressive tariff. This result is supported with a numerical application using real data from Bangladesh: progressive tariffs may fail to achieve fair cross-subsidization of low-income groups.
Subjects:Water
tarification
prices
fairness
distribution
institutions
JEL:L51
L95
H21
D40
Document Type:Working Paper
Appears in Collections:DIW-Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW

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