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Estimating water demand for urban residential use using a discrete-continuous model and disaggregated data at the household level: the case of the city of Manizales, Colombia

Darío F. Jiménez (), Sergio A. Orrego (), Felipe Vásquez Lavín and Roberto Ponce Oliva ()
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Darío F. Jiménez: Universidad Nacional de Colombia
Sergio A. Orrego: Universidad Nacional de Colombia

Lecturas de Economía, 2017, issue 86, 153-178

Abstract: The water demand for urban residential use is estimated for the city of Manizales, Colombia, using a structural model that includes both the discrete choice associated with the consumption block and the continuous choice related to the monthly amount of water consumed. The water demand is econometrically estimated using a unique database for a developing country, which contains data on monthly consumption of water, household size, housing characteristics, weather variables, the marginal price of the respective consumption block and the virtual income for 490 households during the period 1997-2013. The results suggest that the estimated structural model is consistent with utility maximization and seems to be the most appropriate empirical approach to estimate econometrically the water demand for urban residential use. Water demand is inelastic, information that is relevant for policy making and the regulation of water resources in urban areas of Colombia.

Keywords: water demand; utility maximization; econometric estimation; price elasticity of demand (search for similar items in EconPapers)
JEL-codes: D12 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.17533/udea.le.n86a06

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Handle: RePEc:lde:journl:y:2017:i:86:p:153-178