The Economics of Equity and Affordability in Residential Water Pricing
This article explores equity and affordability in urban residential water pricing, highlighting the need to evaluate assistance programs to ensure equitable access to water.
Abstract
In this review, I explore the economic dimensions of equity and affordability in urban residential water pricing. I summarize the growing literature on water affordability and discuss its relationship to more common studies of distributional issues in water demand. I also explore how utilities use various rate structures, such as increasing block rates, to address affordability concerns, emphasizing empirical evidence on the ineffectiveness of these rate structures in achieving equity goals. Moreover, I discuss the design of customer assistance programs in alleviating burdens on low-income households and summarize the scant evidence of the effectiveness of these programs. Ultimately, I highlight the need for more empirical evaluations of equity-focused programs and a greater focus on the distributional consequences of water management strategies to ensure equitable access to this essential resource.
Keywords: Water, distributional effects, equity, affordability
JEL: Q54, R23, R11
