Modelling regional water demand in Tunisia using panel cointegration second generation tests

Nidhaleddine Ben Cheikh () and Ben Zaied Younes ()

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Abstract: The main originality of this paper is to model long run patterns of residential water consumption using quarterly non stationary panel data covering the six regions in Tunisia for the period 1980–2007. Introducing cross-sectional dependence, which is neglected in the first generation panel unit root and panel cointegration literature, we claim for new insights concerning residential water behaviours in the long-run. Considering two consumption blocks' decomposition and dealing with increasing block rates schedule, we show that there is interdependence in the long run between the six regions in Tunisia. The ECM and Panel cointegration analysis reveals regional disparities in water price elasticity. Coastal regions are less sensible to water tariff than interior regions and short run elasticties are smaller than their long run counterparts. Therefore, we propose to increase water price progressivity for the upper block and reduce it for the lower block to achieve goals of social equity.

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Date: 2015
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Published in Journal of Quantitative Economics, 2015, 13, pp.237 - 251

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01549801

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