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Nondiscretionary residential water use: the impact of habits and water-efficient technologies

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  • Garcia-Valiñas, Maria A.
  • Athukorala, Wasantha
  • Wilson, Clevo
  • Torgler, Benno
  • Gifford, Robert

Abstract

Several studies published in the last few decades have demonstrated a low priceelasticity for residential water use. In particular, it has been shown that there is a quantity of water demanded that remains constant regardless of prices and other economic factors. In this research, we characterise residential water demand based on a Stone-Geary utility function. This specification is not only theory-compatible but can also explicitly model a minimum level of consumption not dependent on prices or income. This is described as minimum threshold or nondiscretionary water use. Additionally, the Stone-Geary framework is used to model the subsistence level of water consumption that is dependent on the temporal evolution of consumer habits and stock of physical capital. The main aim of this study is to analyse the impact of water-saving habits and water-efficient technologies on residential water demand, while additionally focusing attention on nondiscretionary uses. This is informed by an empirical application using data from a survey conducted among residents of Brisbane City Council, Australia. The results will be especially useful in the design of water tariffs and other water-saving policies.

Suggested Citation

  • Garcia-Valiñas, Maria A. & Athukorala, Wasantha & Wilson, Clevo & Torgler, Benno & Gifford, Robert, 2014. "Nondiscretionary residential water use: the impact of habits and water-efficient technologies," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(2), April.
  • Handle: RePEc:ags:aareaj:260079
    DOI: 10.22004/ag.econ.260079
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    File URL: http://ageconsearch.umn.edu/record/260079/files/ajar12030.pdf
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    References listed on IDEAS

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    1. Katrin Millock & Céline Nauges, 2010. "Household Adoption of Water-Efficient Equipment: The Role of Socio-Economic Factors, Environmental Attitudes and Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(4), pages 539-565, August.
    2. Roberto Martinez-Espineira & Celine Nauges, 2004. "Is all domestic water consumption sensitive to price control?," Applied Economics, Taylor & Francis Journals, vol. 36(15), pages 1697-1703.
    3. Sylvestre Gaudin & Ronald C. Griffin & Robin C. Sickles, 2001. "Demand Specification for Municipal Water Management: Evaluation of the Stone-Geary Form," Land Economics, University of Wisconsin Press, vol. 77(3), pages 399-422.
    4. Mary E. Renwick & Sandra O. Archibald, 1998. "Demand Side Management Policies for Residential Water Use: Who Bears the Conservation Burden?," Land Economics, University of Wisconsin Press, vol. 74(3), pages 343-359.
    5. Roseta-Palma, Catarina & Monteiro, Henrique, 2008. "Pricing for Scarcity," MPRA Paper 10384, University Library of Munich, Germany.
    6. Georg Meran & Christian von Hirschhausen, 2009. "Increasing Block Tariffs in the Water Sector: A Semi-Welfarist Approach," Discussion Papers of DIW Berlin 902, DIW Berlin, German Institute for Economic Research.
    7. 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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    10. Heather E. Campbell & Ryan M. Johnson & Elizabeth Hunt Larson, 2004. "Prices, Devices, People, or Rules: The Relative Effectiveness of Policy Instruments in Water Conservation1," Review of Policy Research, Policy Studies Organization, vol. 21(5), pages 637-662, September.
    11. Elena Domene & David Saurí, 2006. "Urbanisation and Water Consumption: Influencing Factors in the Metropolitan Region of Barcelona," Urban Studies, Urban Studies Journal Limited, vol. 43(9), pages 1605-1623, August.
    12. Gilg, Andrew & Barr, Stewart, 2006. "Behavioural attitudes towards water saving? Evidence from a study of environmental actions," Ecological Economics, Elsevier, vol. 57(3), pages 400-414, May.
    13. Céline Nauges & Alban Thomas, 2000. "Privately Operated Water Utilities, Municipal Price Negotiation, and Estimation of Residential Water Demand: The Case of France," Land Economics, University of Wisconsin Press, vol. 76(1), pages 68-85.
    14. Katrin Millock & Céline Nauges, 2010. "Household Adoption of Water-Efficient Equipment: The Role of Socio-Economic Factors, Environmental Attitudes and Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(4), pages 539-565, August.
    15. Yeti Nisha Madhoo, 2009. "Policy and nonpolicy determinants of progressivity of block residential water rates - a case study of Mauritius," Applied Economics Letters, Taylor & Francis Journals, vol. 16(2), pages 211-215.
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    Cited by:

    1. Leroux, Anke D. & Martin, Vance L. & Zheng, Hao, 2018. "Addressing water shortages by force of habit," Resource and Energy Economics, Elsevier, vol. 53(C), pages 42-61.
    2. María Pérez-Urdiales & María García-Valiñas & Roberto Martínez-Espiñeira, 2016. "Responses to Changes in Domestic Water Tariff Structures: A Latent Class Analysis on Household-Level Data from Granada, Spain," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(1), pages 167-191, January.

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