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Erschienen in: Water Resources Management 8/2012

01.06.2012

Estimating Residential Water Demand Using the Stone-Geary Functional Form: The Case of Sri Lanka

verfasst von: Dinusha Dharmaratna, Edwyna Harris

Erschienen in: Water Resources Management | Ausgabe 8/2012

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Abstract

This paper formulates a demand model for residential water in Sri Lanka using the Stone-Geary functional form. This functional form considers water consumption to be composed of two parts—a fixed and a residual component. The presence of these two components means it is possible to estimate a threshold below which water consumption is non-responsive to price changes. In turn, this can provide policy makers with a better understanding of the degree to which price changes will affect water consumption and the extent to which price instruments can be utilised to raise additional revenues. These revenues could then be used to extend pipe-borne water infrastructure to a greater proportion of the population than is currently the case. The findings presented here show the portion of water use that is insensitive to price changes in Sri Lanka is between 0.64 and 1.06 m3 per capita per month. The results indicate that price elasticity ranges from -0.11 to -0.14 while income elasticity varies from 0.11 to 0.14. Combined, these findings suggest water authorities could raise revenue via price increases to fund critical infrastructure extension.

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Fußnoten
1
In 2005, 95 % of the urban and 75 % of the rural population had access to safe drinking water while 75 % of the urban and 14 % of the rural population had access to pipe-borne water (queryImbulana et al. 2006).
 
2
In 2005 1 USD was equal to 102 SLRS (Central Bank of Sri Lanka 2005).
 
3
Refer to Appendix 1 for further details of the instrumental marginal price.
 
4
Refer to Appendix 1 for details of the procedure adopted to obtain both MP* and D*.
 
5
A panel regression for the Cobb-Douglas demand function was estimated using OLS, instrumental variable, and two-stage least square methods and the results are available on request from the authors.
 
6
This is based on the average household monthly consumption of 20 m3 at 2005 prices which equals 117.50 SLRS. As noted, in 2005 the exchange rate announced by the Central Bank of Sri Lanka was 1 USD equals 102 SLRS.
 
7
The test assumes that the OLS will be consistent and asymptotically efficient under the null hypothesis that the price variables are exogenous but will be inconsistent under the alternative hypothesis. The calculated Hausman test statistic is 181.9 which greatly exceed the critical value of chi-square at 1 % level of significance with 6° of freedom.
 
8
For the Cobb-Douglas form, estimated price elasticity of water demand ranged from -0.11 to -0.58 while income elasticity ranged from 0.03 to 0.13.
 
9
The coefficient of the number of household varies from 0.21 to 0.86 for the Cobb-Douglas functional form.
 
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Metadaten
Titel
Estimating Residential Water Demand Using the Stone-Geary Functional Form: The Case of Sri Lanka
verfasst von
Dinusha Dharmaratna
Edwyna Harris
Publikationsdatum
01.06.2012
Verlag
Springer Netherlands
Erschienen in
Water Resources Management / Ausgabe 8/2012
Print ISSN: 0920-4741
Elektronische ISSN: 1573-1650
DOI
https://doi.org/10.1007/s11269-012-0017-1

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