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

Muhammad Halley Yudhistira, Prani Sastiono, and Melly Meliyawati

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.

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