Water Policy 5 Number 3 237-256 (2003)

Price specification issues under block tariffs: a Spanish case study

Roberto Martínez-Espiñeira

Department of Economics, St Francis Xavier University, PO Box 5000, Antigonish, NS, Canada B2G 2W5 Tel.: +1 902 867 5443;Fax: +1 902 867 3610; E-mail: rmespi@stfx.ca

A panel of aggregate data from Spain is used to estimate domestic water demand functions under linear and non-linear tariffs. The use of intra-annual European data constitutes an innovative contribution. The average price per unit of water sold is compared with other price specifications that have been suggested to analyze aggregate data. Average-price elasticity estimates lie between -0.51 and -0.67 and are substantially larger than marginal-price elasticity estimates. Elasticities appear inversely correlated to the size of free allowances covered by minimum charges. Climatic variables seem to affect use, although less than in wealthier and drier areas.

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