Sensitivity of Water Price Elasticity Estimates to Different Data Aggregation Levels
Date
2021
Type:
Article
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Abstract
The empirical literature on residential water demand employs various data aggregation
methods, which depend on whether the aggregation is over consumption,
sociodemographic variables, or both. In this study, we distinguish three dataset types—
aggregated data, disaggregated data, and semi-aggregated data—to compare the consequences of using a large sample of semi-aggregated data vis-à-vis a small sample of fully
disaggregated data on the water price elasticity estimates. We also analyze whether
different aggregation levels in the sociodemographic variables affect the water price
elasticity estimates when the number of observations is fixed. We employ a discrete continuous choice model that considers that consumers face an increasing block price
structure. Our results demonstrate that the water price elasticities depend upon the level of aggregation of the data used and the sample size. We also find that the water price
elasticities are statistically different when comparing a large semi-aggregated sample with
a small disaggregated sample.
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Citation
Flores Arévalo, Y., Ponce Oliva, R.D., Fernández, F.J. et al. Sensitivity of Water Price Elasticity Estimates to Different Data Aggregation Levels. Water Resour Manage 35, 2039–2052 (2021). https://doi.org/10.1007/s11269-021-02833-3
Keywords
Data aggregation, Water price elasticity, Discrete‐continuous choice model, Increasing block price structure