Shaanxi Empirical Research On Urban Household Water Demand Function

There have been numerous studies examining the water demand function. However, most of them failed to constructure their model based on the economic view of water demand and they calculated the water demand elasticity between two points even though the latest studies performed their empirical analyses using the time series model or cross section model approach. With the fully understanding of these limitations, this paper indicates that empirical analyses must based on the economic view of water demand, choose appropriate form of water demand function, and use proper econometric method. In accordance with these ideas, this study examine the water demand function by estimating a group of elasticities of demand with a panel data set of 10 cities in Shannxi province. The purpose of this study is to evaluate the water demand function in Shannxi province and give a solid base of water conservation. In the empirical analysis, per capita daily consumption of tap water for residential use is treated as dependent variable, water price, disposable income, number of residents, total water consumption for residents, precipitation, per capita daily consumption of water of last year, year 2001 dummy variable is treated as variable. To my knowledge, this is the first study of using the panel data model to estimate the water demand function. Previous studies used time series model or cross section model. The result shows most of parameters past t-test and a strict discussion has been down. Price elasticity of demand is about -0.239082, suggesting that pricing policies can be a potential instrument for water conservation. Number of residents elasticity of demand is -1.02138. Total water consumption elasticity of demand is 0.365265. Futher the estimated income elasticity of demand using cross section in Xi'an is about 0.349654.