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

Muhammad Halley Yudhistira, Prani Sastiono, and Melly Meliyawati


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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