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

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Author Info
Martinez-Espineira, Roberto

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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.

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File URL: http://mpra.ub.uni-muenchen.de/615/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 615.

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Date of creation: Apr 2005
Date of revision: Jan 2006
Handle: RePEc:pra:mprapa:615

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Related research
Keywords: seasonal unit roots residential water demand price elasticity time-series co-integration Error Correction Model.

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Find related papers by 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
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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