Estimation of price and income elasticity of residential water demand in the Czech Republic over three decades

Ščasný, M., Smutná, Š. (2021) Journal of Consumer Affairs, 55(2), 580-608

This paper contributes to residential water demand literature by providing price and income elasticity estimates for a country which has undergone deep structural, institutional and economic changes. We analyze short-run and long-run residential water demand using household-level data for the Czech Republic for the period of 1993-2016, during which the price of water nearly tripled, consumption decreased by a third, and families became considerably richer. Our estimates of price and income elasticity indicate low responsiveness of households to changes of these factors. Income elasticity is about +0.16 and it is robust across models. The short-run price elasticity is about -0.22, on the low end of estimates derived for other developed economies. Long-run price elasticity is around -0.30. While households were more price responsive during the period of economic transformation, they became completely unresponsive during the later economic boom.


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