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Self-selection bias and manufacturing firms' demand for water recirculation

Steven Renzetti, Joel Bruneau () and Michel Villeneuve ()
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Michel Villeneuve: Environment Canada

No 902, Working Papers from Brock University, Department of Economics

Abstract: Relatively little is known of the factors which might influence firms' water recirculation decisions. This paper estimates an econometric model that accounts for potential self-selection bias and considers two facets of firms' recirculation behaviour: first, the discrete decision of whether to recirculate and, second, the decision of how much to recirculate. The model is estimated by applying the Heckman two-stage estimation procedure to data from Environment Canada's Industrial Water Use Survey. In the first stage, long run factors such as relative water scarcity and production technologies are found to influence the decision whether to recirculate water. In the second stage, the imputed prices of intake water and water recirculation as well as the scale of operations are found to influence the choice of the optimal quantity of water to recirculate.

Keywords: water demand; rericulation; Heckman (search for similar items in EconPapers)
JEL-codes: Q25 Q21 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2009-02, Revised 2009-02
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