Abstract
Changes in water availability, and hence price, are expected to be amongst the most disruptive effects of climate change in many parts of the world. Understanding the capacity of society or consumers to adapt to such changes requires understanding the responsiveness of water demand to price changes. We estimate the price elasticity of residential water demand in Phoenix, Arizona, which is likely to be strongly impacted by climate change. Most existing approaches to the estimation of water demand functions have limited capacity to isolate the effect of price on water consumption where there is little variation in water price. A recent study by Klaiber et al. (2012) attempts to address this issue by using differences in consumption levels, and weather-related characteristics to isolate the price effect on water demand, and by using a constant term in a differenced regression model. We also estimate a differenced regression model, but include direct measures of changes in water prices. This inclusion successfully isolates the price effect on water demand, and enables us to distinguish between the short- and long-run price elasticity of water demand, and hence the short-and long-run adaptation to changes in water availability.
| Original language | English (US) |
|---|---|
| Article number | ppt054 |
| Pages (from-to) | 333-350 |
| Number of pages | 18 |
| Journal | Applied Economic Perspectives and Policy |
| Volume | 36 |
| Issue number | 2 |
| DOIs | |
| State | Published - 2014 |
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Keywords
- Marginal price
- Price elasticity
- Water demand function
ASJC Scopus subject areas
- Economics and Econometrics
- Development
Cite this
Estimating the price elasticity of residential water demand : The case of Phoenix, Arizona. / Yoo, James; Simonit, Silvio; Kinzig, Ann; Perrings, Charles.
In: Applied Economic Perspectives and Policy, Vol. 36, No. 2, ppt054, 2014, p. 333-350.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Estimating the price elasticity of residential water demand
T2 - The case of Phoenix, Arizona
AU - Yoo, James
AU - Simonit, Silvio
AU - Kinzig, Ann
AU - Perrings, Charles
PY - 2014
Y1 - 2014
N2 - Changes in water availability, and hence price, are expected to be amongst the most disruptive effects of climate change in many parts of the world. Understanding the capacity of society or consumers to adapt to such changes requires understanding the responsiveness of water demand to price changes. We estimate the price elasticity of residential water demand in Phoenix, Arizona, which is likely to be strongly impacted by climate change. Most existing approaches to the estimation of water demand functions have limited capacity to isolate the effect of price on water consumption where there is little variation in water price. A recent study by Klaiber et al. (2012) attempts to address this issue by using differences in consumption levels, and weather-related characteristics to isolate the price effect on water demand, and by using a constant term in a differenced regression model. We also estimate a differenced regression model, but include direct measures of changes in water prices. This inclusion successfully isolates the price effect on water demand, and enables us to distinguish between the short- and long-run price elasticity of water demand, and hence the short-and long-run adaptation to changes in water availability.
AB - Changes in water availability, and hence price, are expected to be amongst the most disruptive effects of climate change in many parts of the world. Understanding the capacity of society or consumers to adapt to such changes requires understanding the responsiveness of water demand to price changes. We estimate the price elasticity of residential water demand in Phoenix, Arizona, which is likely to be strongly impacted by climate change. Most existing approaches to the estimation of water demand functions have limited capacity to isolate the effect of price on water consumption where there is little variation in water price. A recent study by Klaiber et al. (2012) attempts to address this issue by using differences in consumption levels, and weather-related characteristics to isolate the price effect on water demand, and by using a constant term in a differenced regression model. We also estimate a differenced regression model, but include direct measures of changes in water prices. This inclusion successfully isolates the price effect on water demand, and enables us to distinguish between the short- and long-run price elasticity of water demand, and hence the short-and long-run adaptation to changes in water availability.
KW - Marginal price
KW - Price elasticity
KW - Water demand function
UR - http://www.scopus.com/inward/record.url?scp=84905187724&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84905187724&partnerID=8YFLogxK
U2 - 10.1093/aepp/ppt054
DO - 10.1093/aepp/ppt054
M3 - Article
AN - SCOPUS:84905187724
VL - 36
SP - 333
EP - 350
JO - Applied Economic Perspectives and Policy
JF - Applied Economic Perspectives and Policy
SN - 2040-5790
IS - 2
M1 - ppt054
ER -