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Estimating Urban Water Demand Elasticities using Regression Discontinuity: A Case of Tangerang Regency, Indonesia

Author

Listed:
  • Muhammad Halley Yudhistira

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Prani Sastiono

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Melly Meliyawati

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

Abstract

We estimate the effect of water tariff adjustment in Tangerang city, Indonesia in November 2014 on monthly water consumption. Due to typical water-block pricing strategy, estimating water demand elasticities are likely to be complex. A unique panel monthly water consumption dataset at consumer level in Tangerang regency covering the period of January 2011–September 2016 is used. Using regression discontinuity framework, we find a 13% average tariff increase reduces 4% household water consumption on average. Further, our estimates suggest the tariff adjustment provides no effects on high-income households, industrial, and commercial consumers. We also find more elastic response of water consumption in short-run period than in long-run.

Suggested Citation

  • Muhammad Halley Yudhistira & Prani Sastiono & Melly Meliyawati, 2018. "Estimating Urban Water Demand Elasticities using Regression Discontinuity: A Case of Tangerang Regency, Indonesia," LPEM FEBUI Working Papers 201818, LPEM, Faculty of Economics and Business, University of Indonesia, revised Mar 2018.
    • Handle: RePEc:lpe:wpaper:201818
    as

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    File URL: https://www.lpem.org/repec/lpe/papers/WP201818.pdf
    File Function: First version, 2018
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    References listed on IDEAS

    as
    1. Paul J. Burke & Md Shahiduzzaman & David I. Stern, 2015. "Carbon dioxide emissions in the short run: The rate and sources of economic growth matter," CAMA Working Papers 2015-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    3. Burke, Paul J. & Batsuuri, Tsendsuren & Yudhistira, Muhammad Halley, 2017. "Easing the traffic: The effects of Indonesia’s fuel subsidy reforms on toll-road travel," Transportation Research Part A: Policy and Practice, Elsevier, vol. 105(C), pages 167-180.
    4. Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB), 2016. "Indonesia Country Water Assessment," ADB Reports RPT167988, Asian Development Bank (ADB).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Water Demand Elasticities — Urban Water — Regression Discontinuity Design — Indonesia;

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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