Social and nonlinear tariffs on drinking water: Cui bono? Empirical evidence from a natural experiment in France

Abstract

This empirical study discusses both the incentive and redistributive effects of nonlinear tariffs on the drinking water of developed countries. Using an original panel database based on a natural experience with drinking water in France, we econometrically explore the impact of tariffs changes on consumption (linear versus nonlinear). We demonstrate that this measure reduces global consumption. However, small consumers ( > 75 m3) benefit from the new tariff program and increase their consumption, whereas the consumption of the others ( > 75 m3) decreases. Public policy implications of such tariffs on drinking water may lead to a discussion on the design of these tariffs and the quality of the information given on water consumption.