Modelling seasonality in residential water demand: the case of Tunisia

Abstract

This article proposes to model seasonal patterns of residential water demand using the techniques of seasonal integration and cointegration. The methodology is applied to quarterly aggregate time series data for Tunisia (1980–2007), applying the same increasing, multi-step pricing scheme in the whole country. First, a seasonal cointegration analysis demonstrates the relevance of a pricing policy that increases the size of the lower consumption block in summer. Second, the nonseasonal cointegration analysis reveals a relatively high price elasticity for the highest consumption block. Therefore, we also propose to increase the tariff progressivity to promote water savings. This modified pricing scheme will help to achieve goals of environmental protection and social equity.

Keywords:

• residential water demand
• seasonal integration
• seasonal cointegration
• increasing block tariffs

JEL Classification:

• C22
• Q25

Notes

¹ Ayadi et al. (2002) used the same two-block breakdown, which improved the quality of their results.

² The procedure hegy.src developed by T. Doan for RATS software was used.