Abstract
The availability, price, and quality of infrastructure services vary considerably across regions. This paper analyzes which elements significantly contribute to geographical differences in water prices. For empirical analysis, it employs water supply price and demand equations under a system of simultaneous structural equations. Several institutional factors explain geographical differences in water prices, such as prior appropriation water rights versus riparian rights, pricing structures, combining water bills with other bills, and other infrastructure. Water rate regulations by public utility commission also have some negative effects on water prices. State environmental regulations and commitments contribute to higher water prices, especially for non-residential water users.
Highlights
Infrastructure services affect social welfare in two important ways (Kessides 1996; Haughwout 2001): by facilitating private sector business activities and by improving quality-of-life environments
As this paper focuses on geographical differences in water prices across water utilities, it presents only the 3SLS results of the price equation for water supply
Infrastructure services contribute to social welfare through facilitating business activities in the private sector and improving quality-of-life environments
Summary
Infrastructure services affect social welfare in two important ways (Kessides 1996; Haughwout 2001): by facilitating private sector business activities and by improving quality-of-life environments. The contributions of infrastructure services to quality-of-life environments are as important as economic development contributions.. Few empirical studies on the contributions of infrastructure services to quality-of-life environments are available, which reflects the difficulty of measuring those contributions The effects of private ownership and operation on the price and quality of local services are interesting, and this paper examines water supply as its example. It investigates what other institutional factors and characteristics are important in explaining geographical differences in water prices, such as pricing rate structures, prior appropriation water rights (versus riparian rights), seasonal peak rates, and water rate regulations.
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