An Estimation of the Elasticity Demand for Tap Water: Data from Tax Rolls and a Survey

By Russ Kashian, Jeff Heinrich and Andrew Kueffer.

Published by The International Journal of Sustainability in Economic, Social and Cultural Context

Format Price
Article: Print $US10.00
Published online: March 12, 2016 $US5.00

The demand for water remains a hot button issue among economists and policy makers. In this paper, we study the effects of water pricing on two tiers of consumers: normal and heavy users. We show that heavy users are less price-sensitive to the price of water than normal users are. Our price elasticity estimates are within the range of previous literature; we estimate a price elasticity of 0.4 for the residential demand for water. A logit regression model is employed in order to determine what characteristics heavy users possess. We find that having more residents living in a household and residents with higher income are significant characteristics of heavy-usage households. Finally, we provide a robustness check in the form of estimating a rare events logit model. Our rare events logit model estimates are consistent with those of the regular logit estimates.

Keywords: Sustainability, Conservation, Price Elasticity of Demand

The International Journal of Social Sustainability in Economic, Social and Cultural Context, Volume 12, Issue 2, June 2016, pp.1-16. Article: Print (Spiral Bound). Published online: March 12, 2016 (Article: Electronic (PDF File; 981.700KB)).

Dr. Russ Kashian

Professor, Department of Economics, University of Wisconsin Whitewater, Whitewater, WI, USA

Dr. Jeff Heinrich

Department of Economics, University of Wisconsin Whitewater, Whitewater, WI, USA

Andrew Kueffer

Graduate Student, Department of Economics, University of North Carolina, Greensboro, NC, USA