Dynamics of residential water consumption in a panel of Italian municipalities

Antonio Musolesi () and Mario Nosvelli

Applied Economics Letters, 2007, vol. 14, issue 6, 441-444

Abstract: The purpose of this study is to estimate a residential water demand function in a dynamic framework for a panel of Italian municipalities and to calculate both short-run and long-run price elasticities. The Generalized Method of Moments (GMM) provides a suitable framework for obtaining asymptotically efficient estimators in this context. Specifically, the system GMM estimator is applied, which improves the properties of the standard first-difference estimator. The most relevant result shows that persistence of habits is coupled with high long-term price elasticity which is higher, in absolute value, that the instantaneous (one-year) price elasticity. Under an economic policy perspective, the effects of policy interventions can be suitably evaluated only in the long-run.

Date: 2007
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DOI: 10.1080/13504850500425642

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