Estimation of price and income elasticity of residential water demand in the Czech Republic over three decades
Abstract
This paper contributes to residential water demand literature by providing price and income elasticity estimates for a country which has undergone deep structural, institutional and economic changes. We analyze short-run and long-run residential water demand using household-level data for the Czech Republic for the period of 1993-2016, during which the price of water nearly tripled, consumption decreased by a third, and families became considerably richer.
Our estimates of price and income elasticity indicate low responsiveness of households to changes of these factors. Income elasticity is about +0.16 and it is robust across models.
The short-run price elasticity is about -0.22, on the low end of estimates derived for other developed economies. Long-run price elasticity is around -0.30.
While households were more price responsive during the period of economic transformation, they became completely unresponsive during the later economic boom.