Abstract
This paper analyses econometrically residential water demand in the three major urban areas of Cyprus, a semi-arid country with medium to high income levels. Water demand turns out to be inelastic, but not insensitive, to prices; price elasticity is less than unity in absolute terms, but significantly different from zero. The analysis further shows that periodic interruptions in household water supply, which were applied as an urgent water saving measure in 2008–2009, did not encourage water conservation among the population. The paper discusses these results, pointing at the need for appropriate water pricing policies and long-term planning in order to move towards sustainable water resource management.
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Notes
Alternative specifications were also tested, with time trends, seasonal dummy variables and time lags of several independent variables, but none of these turned out to be statistically significant.
The specification assumes that elasticities are constant throughout the sample. This is a simplification because consumer response (expressed in elasticities) will probably be different at very different income or price levels, but the available dataset is not rich enough to enable the use of more complex model specifications that allow elasticities to vary.
Note that there was essentially no change in water prices during the period of disruptions.
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Acknowledgments
Work reported here was funded partly by the Cyprus University of Technology and partly by the European Commission under Marie Curie Reintegration Grant No. PERG03-GA-2008-230595 – “Assessment of Economic Impacts of Climate Change in Cyprus” in the framework of the 7th European Community Framework Programme. The authors are grateful to several staff members of Municipal Water Boards of Cyprus for provision of unpublished data and numerous useful discussions. Two anonymous referees provided very helpful suggestions that greatly improved the manuscript. Obviously the authors are solely responsible for the interpretation of results as well as for eventual errors or omissions.
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Polycarpou, A., Zachariadis, T. An Econometric Analysis of Residential Water Demand in Cyprus. Water Resour Manage 27, 309–317 (2013). https://doi.org/10.1007/s11269-012-0187-x
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DOI: https://doi.org/10.1007/s11269-012-0187-x