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Price impact on urban residential water demand: A dynamic panel data approach
Author(s) -
Arbués Fernando,
Barberán Ramón,
Villanúa Inmaculada
Publication year - 2004
Publication title -
water resources research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.863
H-Index - 217
eISSN - 1944-7973
pISSN - 0043-1397
DOI - 10.1029/2004wr003092
Subject(s) - price elasticity of demand , econometrics , panel data , economics , elasticity (physics) , income elasticity of demand , demand curve , econometric model , estimation , microeconomics , materials science , management , composite material
In this paper, we formulate and estimate a model of residential water demand with the aim of evaluating the potential of pricing policies as a mechanism for managing residential water. The proposed econometric model offers a new perspective on urban water demand analysis by combining microlevel data with a dynamic panel data estimation procedure. The empirical application suggests that residential users are more responsive to a lagged average price specification. Another result of the estimated model is that price is a moderately effective tool in reducing residential water demand within the present range of prices, with the estimated values for income elasticity and “elasticity of consumption with respect to family size” reinforcing this conclusion.