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An Estimation of Residential Water Demand Using Co-Integration and Error Correction Techniques

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  • Martinez-Espineira, Roberto
Abstract
In this paper short- and long-run price elasticities of residential water demand are estimated using co-integration and error-correction methods. Unit root tests reveal that water use series and series of other variables affecting use are non-stationary. However, a long-run co-integrating relationship is found in the water demand model, which makes it possible to obtain a partial correction term and to estimate an error correction model. The empirical application uses monthly time-series observations from Seville (Spain). The price-elasticity of demand is estimated as around -0.1 in the short run and -0.5 in the long run. These results are robust to the use of different specifications.

Suggested Citation

  • Martinez-Espineira, Roberto, 2005. "An Estimation of Residential Water Demand Using Co-Integration and Error Correction Techniques," MPRA Paper 615, University Library of Munich, Germany, revised Jan 2006.
    • Handle: RePEc:pra:mprapa:615
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    1. Buck, Steven & Nemati, Mehdi & Sunding, David, 2016. "The Welfare Consequences of the 2015 California Drought Mandate: Evidence from New Results on Monthly Water Demand," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236049, Agricultural and Applied Economics Association.
    2. Younes Ben Zaied & Nidhaleddine Ben Cheikh & Pascal Nguyen, 2017. "Modeling nonlinear water demand : The case of Tunisia," Economics Bulletin, AccessEcon, vol. 37(2), pages 637-644.
    3. Marie-Estelle Binet & Younes Ben Zaïd, 2011. "A Seasonal Integration and Cointegration Analysis of Residential Water Demand in Tunisia," Economics Working Paper Archive (University of Rennes & University of Caen) 201122, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    4. Ben Zaied Younes, 2013. "A long-run analysis of residential water consumption," Economics Bulletin, AccessEcon, vol. 33(1), pages 536-544.

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    More about this item

    Keywords

    seasonal unit roots; residential water demand; price elasticity; time-series; co-integration; Error Correction Model;
    All these keywords.

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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