IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

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

  • Roberto Martinez Espineira

    (St. Francis Xavier University)

The purpose of this paper is to measure the short- and long-run effect ofthe price of water on residential water use. 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 demand model, which makes 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econwpa.repec.org/eps/othr/papers/0410/0410002.pdf
Download Restriction: no

Paper provided by EconWPA in its series Others with number 0410002.

as
in new window

Length: 47 pages
Date of creation: 03 Oct 2004
Date of revision:
Handle: RePEc:wpa:wuwpot:0410002
Note: Type of Document - pdf; pages: 47
Contact details of provider: Web page: http://econwpa.repec.org

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Beenstock, Michael & Goldin, Ephraim & Nabot, Dan, 1999. "The demand for electricity in Israel," Energy Economics, Elsevier, vol. 21(2), pages 168-183, April.
  2. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
  3. Franses, Philip Hans, 1991. "Seasonality, non-stationarity and the forecasting of monthly time series," International Journal of Forecasting, Elsevier, vol. 7(2), pages 199-208, August.
  4. Hylleberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988. "Seasonal, Integration And Cointegration," Papers 6-88-2, Pennsylvania State - Department of Economics.
  5. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  6. David L. Chicoine & Ganapathi Ramamurthy, 1986. "Evidence on the Specification of Price in the Study of Domestic Water Demand," Land Economics, University of Wisconsin Press, vol. 62(1), pages 26-32.
  7. Paulo Rodrigues & Philip Hans Franses, 2005. "A sequential approach to testing seasonal unit roots in high frequency data," Journal of Applied Statistics, Taylor & Francis Journals, vol. 32(6), pages 555-569.
  8. 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.
  9. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
  10. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  11. Breusch, Trevor S & Wickens, Michael R., 1987. "Dynamic Specification, the Long Run and the Estimation of Transformed Regression Models," CEPR Discussion Papers 154, C.E.P.R. Discussion Papers.
  12. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
  13. Fouquet, Roger, 1995. "The impact of VAT introduction on UK residential energy demand : An investigation using the cointegration approach," Energy Economics, Elsevier, vol. 17(3), pages 237-247, July.
  14. Anindya Banerjee & Robin L. Lumsdaine & James H. Stock, 1990. "Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis: Theory and International Evidence," NBER Working Papers 3510, National Bureau of Economic Research, Inc.
  15. 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.
  16. Arbues, Fernando & Garcia-Valinas, Maria Angeles & Martinez-Espineira, Roberto, 2003. "Estimation of residential water demand: a state-of-the-art review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(1), pages 81-102, March.
  17. Christopher F. Baum, 2001. "Tests for stationarity of a time series," Stata Technical Bulletin, StataCorp LP, vol. 10(57).
  18. Clemente, Jesus & Montanes, Antonio & Reyes, Marcelo, 1998. "Testing for a unit root in variables with a double change in the mean," Economics Letters, Elsevier, vol. 59(2), pages 175-182, May.
  19. Joseph Beaulieu, J. & Miron, Jeffrey A., 1993. "Seasonal unit roots in aggregate U.S. data," Journal of Econometrics, Elsevier, vol. 55(1-2), pages 305-328.
  20. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  21. G. William Schwert, 1988. "Tests For Unit Roots: A Monte Carlo Investigation," NBER Technical Working Papers 0073, National Bureau of Economic Research, Inc.
  22. 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.
  23. Ellen M. Pint, 1999. "Household Responses to Increased Water Rates during the California Drought," Land Economics, University of Wisconsin Press, vol. 75(2), pages 246-266.
  24. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  25. Engle, R. F. & Granger, C. W. J. & Hallman, J. J., 1989. "Merging short-and long-run forecasts : An application of seasonal cointegration to monthly electricity sales forecasting," Journal of Econometrics, Elsevier, vol. 40(1), pages 45-62, January.
  26. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier.
  27. Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
  28. 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.
  29. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
  30. Ramanathan, R., 1999. "Short- and long-run elasticities of gasoline demand in India: An empirical analysis using cointegration techniques," Energy Economics, Elsevier, vol. 21(4), pages 321-330, August.
  31. Céline Nauges & Alban Thomas, 2003. "Long-run Study of Residential Water Consumption," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(1), pages 25-43, September.
  32. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
  33. Graeme Dandy & Tin Nguyen & Carolyn Davies, 1997. "Estimating Residential Water Demand in the Presence of Free Allowances," Land Economics, University of Wisconsin Press, vol. 73(1), pages 125-139.
  34. R. G. Taylor & John R. McKean & Robert A. Young, 2004. "Alternate Price Specifications for Estimating Residential Water Demand with Fixed Fees," Land Economics, University of Wisconsin Press, vol. 80(3), pages 463-475.
  35. Eltony, M. N. & Al-Mutairi, N. H., 1995. "Demand for gasoline in Kuwait : An empirical analysis using cointegration techniques," Energy Economics, Elsevier, vol. 17(3), pages 249-253, July.
  36. Bentzen, Jan, 1994. "An empirical analysis of gasoline demand in Denmark using cointegration techniques," Energy Economics, Elsevier, vol. 16(2), pages 139-143, April.
  37. Sargan, John Denis & Bhargava, Alok, 1983. "Testing Residuals from Least Squares Regression for Being Generated by the Gaussian Random Walk," Econometrica, Econometric Society, vol. 51(1), pages 153-74, January.
  38. Maria García-valiñas, 2005. "Efficiency and Equity in Natural Resources Pricing: A Proposal for Urban Water Distribution Service," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(2), pages 183-204, October.
  39. Christopher F Baum, 2004. "CLEMAO_IO: Stata module to perform unit root tests with one or two structural breaks," Statistical Software Components S444302, Boston College Department of Economics, revised 07 May 2013.
  40. Alban Thomas & Céline Nauges, 2000. "Dynamique de la consommation d'eau potable des ménages : une étude sur un panel de communes françaises," Économie et Prévision, Programme National Persée, vol. 143(2), pages 175-184.
  41. Breusch, T S, 1978. "Testing for Autocorrelation in Dynamic Linear Models," Australian Economic Papers, Wiley Blackwell, vol. 17(31), pages 334-55, December.
  42. Renwick, Mary E. & Green, Richard D., 2000. "Do Residential Water Demand Side Management Policies Measure Up? An Analysis of Eight California Water Agencies," Journal of Environmental Economics and Management, Elsevier, vol. 40(1), pages 37-55, July.
  43. Paulo Rodrigues & Denise Osborn, 1999. "Performance of seasonal unit root tests for monthly data," Journal of Applied Statistics, Taylor & Francis Journals, vol. 26(8), pages 985-1004.
  44. R. Bruce Billings, 1982. "Specification of Block Rate Price Variables in Demand Models," Land Economics, University of Wisconsin Press, vol. 58(3), pages 386-394.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpot:0410002. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.