Explaining Geographical Differences in Water Prices: Do Institutional Factors Really Matter?

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.