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Determinants of residential water demand in Germany

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  • Schleich, Joachim
  • Hillenbrand, Thomas

Abstract

We econometrically analyze the impact of several economic, environmental and social determinants for the per capita demand for water in about 600 water supply areas in Germany. Besides prices, income and household size, we consider the effects of population age, the share of wells, housing patterns, precipitation and temperature. We also explore why current per capita residential water consumption in the new federal states is about 30% lower than in the old federal states. Since average cost pricing may cause an endogeneity problem, we apply instrumental-variable procedures in addition to single equation ordinary least squares, but find no evidence that prices are endogenous. Our estimation results suggest that the price elasticity of water demand in Germany is around -0.24. The income elasticity is positive, decreases with higher income levels and is at least three times higher in the new federal states than in the old federal states. Current differences in prices and income levels explain about one third of the gap in residential water use between the two regions. Household size and the share of wells have a negative impact on per capita water demand, and water use increases with age. Finally, the findings provide some evidence that rainfall patterns rather than total rainfall affect water consumption, while temperature appears to have no impact at all. All outcomes are robust to a log-log and two types of semi-log specifications for the water demand function.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 68 (2009)
Issue (Month): 6 (April)
Pages: 1756-1769

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Handle: RePEc:eee:ecolec:v:68:y:2009:i:6:p:1756-1769

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Web page: http://www.elsevier.com/locate/ecolecon

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Keywords: Residential water demand Water resources management Price elasticity Income elasticity Econometrics;

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References

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Cited by:
  1. Jean-Daniel Rinaudo & Noémie Neverre & Marielle Montginoul, 2012. "Simulating the Impact of Pricing Policies on Residential Water Demand: A Southern France Case Study," Water Resources Management, Springer, vol. 26(7), pages 2057-2068, May.
  2. Fullerton, Thomas M., Jr. & White, Katherine & Smith, Wm. Doyle & Walke, Adam G., 2012. "An Empirical Analysis of Halifax Municipal Water Consumption," MPRA Paper 54113, University Library of Munich, Germany, revised 14 Mar 2013.
  3. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).
  4. Marie-Estelle Binet & Fabrizio Carlevaro & Michel Paul, 2012. "Estimation of Residential Water Demand with Imprecise Price Perception," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201233, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  5. Xiao-Chen Yuan & Yi-Ming Wei & Su-Yan Pan & Ju-Liang Jin, 2014. "Urban Household Water Demand in Beijing by 2020: An Agent-Based Model," Water Resources Management, Springer, vol. 28(10), pages 2967-2980, August.
  6. Ming-Feng Hung & Bin-Tzong Chie, 2013. "Residential Water Use: Efficiency, Affordability, and Price Elasticity," Water Resources Management, Springer, vol. 27(1), pages 275-291, January.
  7. R. Quentin Grafton & Michael B. Ward & Hang To & Tom Kompas, 2011. "Determinants of Residential Water Consumption: Evidence and Analysis from a Ten-country Household Survey," Crawford School Research Papers 1114, Crawford School of Public Policy, The Australian National University.
  8. Genovaitė Liobikienė & Justina Mandravickaitė, 2013. "Convergence of new members of the EU: changes in household consumption expenditure structure regarding environmental impact during the prosperous period," Environment, Development and Sustainability, Springer, vol. 15(2), pages 407-427, April.
  9. Alexandros Polycarpou & Theodoros Zachariadis, 2013. "An Econometric Analysis of Residential Water Demand in Cyprus," Water Resources Management, Springer, vol. 27(1), pages 309-317, January.
  10. Arbues, Fernando & Villanu´a, Inmaculada & Barberan, Ramon, 2010. "Household size and residential water demand: an empirical approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), March.
  11. Müller, Christopher, 2012. "Welfare Effects of Water Pricing in Germany," MPRA Paper 41638, University Library of Munich, Germany.
  12. Maria A. García-Valiñas & Roberto Martínez-Francisco & González-Gómez, 2010. "Water affordability: alternativem measurement and explanatory Factors in Andalusia," Centre for Water Economics, Environment and Policy Papers 1014, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
  13. Maria A. García‐Valiñas & Roberto Martínez‐Espiñeira & Francisco González‐Gómez, 2010. "Economics of Water Reform in the Murray-Darling Basin," Centre for Water Economics, Environment and Policy Papers 1005, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
  14. Alison Browne & Will Medd & Ben Anderson, 2013. "Developing Novel Approaches to Tracking Domestic Water Demand Under Uncertainty—A Reflection on the “Up Scaling” of Social Science Approaches in the United Kingdom," Water Resources Management, Springer, vol. 27(4), pages 1013-1035, March.
  15. Simona FRONE, 2012. "Issues On The Role Of Efficient Water Pricing For Sustainable Water Management," Romanian Journal of Economics, Institute of National Economy, vol. 34(1(43)), pages 84-111, June.
  16. Dinusha Dharmaratna & Edwyna Harris, 2012. "Estimating Residential Water Demand Using the Stone-Geary Functional Form: The Case of Sri Lanka," Water Resources Management, Springer, vol. 26(8), pages 2283-2299, June.
  17. Md Haque & Ataur Rahman & Dharma Hagare & Golam Kibria, 2014. "Probabilistic Water Demand Forecasting Using Projected Climatic Data for Blue Mountains Water Supply System in Australia," Water Resources Management, Springer, vol. 28(7), pages 1959-1971, May.

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