An empirical examination of the distributional impacts of water pricing reforms

• Residential water use In British Columbia, Canada, exhibits inelastic price and income elasticities.
• Impacts of pricing reforms on distribution of water expenditures depend on demand specifications.
• Water suppliers must accurately characterize features of residential water demands.

Water pricing reforms may promote conservation and economic efficiency. However, it is possible for water pricing reforms to be regressive. We estimate Stone-Geary and double-log residential water demand functions using data from the Capital Region District of British Columbia, Canada. Two price reforms are simulated: an across-the-board price increase and an increasing block rate structure. The distributional impacts depend on the specification of water demands. For the across-the-board price increase, the double-log model shows no change in the distribution of water expenditures while the Stone-Geary specification indicates a worsening of the inequality of water expenditures.