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Long-run Study of Residential Water Consumption

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  • Céline Nauges
  • Alban Thomas

Abstract

The estimation of dynamic models and themeasure of long-run effects arerare in residential water demand studies. Weshow in this paper that a dynamicmodel of water consumption can be derived froma structural optimisation programsolved by local communities. Thisnonlinear model is estimated on asample of French municipalities and is foundasymptotically equivalent to a dynamic panel data model that is linear in theparameters. The latter includes anoriginal error-component structure that allowsfor a flexible heterogeneity pattern, including both the usual idiosyncraticeffect, and an additional individualeffect affected by a multiplicative time-varyingparameter. As usual GMM estimators for panel data are not consistent inthis case, we propose a new GMMprocedure that yields consistent and efficientestimates of short- and long-runprice elasticities (respectively −0.26 and−0.40). Copyright Kluwer Academic Publishers 2003

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  • Céline Nauges & Alban Thomas, 2003. "Long-run Study of Residential Water Consumption," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(1), pages 25-43, September.
    • Handle: RePEc:kap:enreec:v:26:y:2003:i:1:p:25-43
    DOI: 10.1023/A:1025673318692
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    References listed on IDEAS

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    1. Lars Gårn Hansen, 1996. "Water and Energy Price Impacts on Residential Water Demand in Copenhagen," Land Economics, University of Wisconsin Press, vol. 72(1), pages 66-79.
    2. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-1395, November.
    3. Céline Nauges & Alban Thomas, 2003. "Consistent estimation of dynamic panel data models with time-varying individual effects," Annals of Economics and Statistics, GENES, issue 70, pages 53-75.
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    11. Michael L. Nieswiadomy & David J. Molina, 1989. "Comparing Residential Water Demand Estimates under Decreasing and Increasing Block Rates Using Household Data," Land Economics, University of Wisconsin Press, vol. 65(3), pages 280-289.
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