MICROECONOMETRIC ANALYSIS OF RESIDENTIAL WATER DEMAND

Cristina Lopez-Mayan ()

Working Papers from CEMFI

Abstract: I present a microeconometric model to analyse residential water demand using panel data. Pricing has an increasing-block structure. Database contains individual consumptions from water meters and lacks further information. Permanent income is treated as an unobservable individual effect determining optimal consumption. I also consider a time-varying shock to connect latent and observed demands. The economic setup gives rise to a random effects model with a nonlinear individual effect. I use likelihood-based indirect inference for estimation. I compute price-elasticities and predict the effects of a tariff change. The methodology can be applied to analyse demands of other goods with increasing tariffs.

Keywords: Household demand; panel data; kinked budget constraint; indirect inference; Random effects; price-elasticity; utilities; increasing-block pricing. (search for similar items in EconPapers)
JEL-codes: D12 L95 Q25 Q28 (search for similar items in EconPapers)
Date: 2008-04
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