Modelling seasonality in residential water demand: the case of Tunisia

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.     

Estimation of the effects of price on apartment water demand using cointegration and error correction techniques

Water price is a key instrument in regulating water demand in the residential sector. Many empirical studies have assessed the effects of price through quantifying the price elasticity of water demand. However, most of these studies have mainly focused on the single-family housing rather the multifamily housing. An in-depth understanding of the price elasticity of multifamily housing water demand is paramount for water planners in order to properly manage water use in the fast growing intensive housing developments in urban areas. This study investigates both the long-term and short-term price elasticities of water demand in the residential apartments in Auckland central city. Using 6 years of monthly time series data, the price elasticities were estimated through cointegration and error correction methods. The results showed that the price elasticities of water demand were ?0.14 and ?0.12 in the short term and the long term, respectively. The price is inelastic yet negative and statistically significant, thus it can play a role in demand management.     

Foreign exchange reserves and import demand in a developing economy: the case of Pakistan

Conventional specifications of import demand in LDCs have commonly been plagued by implausible and unstable parameter estimates. This paper shows the importance of imposing long‐run income homogeneity and of including foreign exchange reserves when estimating import demand function for an LDC. Using several cointegration techniques, it is shown that there is one linear relationship among real imports, real income, relative import prices and real foreign exchange reserves. In addition, by employing stability tests for cointegrated systems by Hansen (1992a), the paper shows that only when foreign exchange reserves and long‐run unit‐income homogeneity are accounted for does a constant parameter, long‐run equilibrium relation emerge for Pakistan. Also, the ensuing short‐run dynamic model is constant and data‐coherent. Finally, the study provides information on the speed of adjustment to equilibrium and the median and mean time lags of adjustments of real imports to changes in their determinants. The results indicate a quick response of real imports to changes in their determinants.     

Weight-based pricing in the collection of household waste: the Oostzaan case

This paper provides an empirical analysis of the effects of weight-based pricing in the collection of household waste. Using a comprehensive panel data set on all households in a Dutch municipality we estimate short-run as well as long-run price effects for the amounts of both compostable and non-recyclable household waste. We find significant and sizeable price effects, with the elasticity for compostable waste being four times as large as the elasticity for non-recyclable waste. Long-run elasticities are about 30% larger than short-run elasticities.     

Balance‐of‐payment constrained growth: the case of China, 1979–2002

The aim of this study is to empirically test the validity of Thirlwall’s Law in China during the reform period of 1979–2002. This study finds: (1) that for 1979–2002, the Chinese economy has grown on average as fast as Thirlwall’s Law predicts – the average actual growth rate and predicted growth rate were, respectively, 9.25 and 8.55, which are statistically identical; (2) that the growth of GDP and of exports are cointegrated. Both (1) and (2) provide strong support for Thirlwall’s Law in China during the reform period after 1978. The supportive result of Thirlwall’s Law implies the relevance of a demand‐side approach to the economic growth in China. For time series analyses, a bounds test approach is adopted.     

Money demand, the Cagan model, testing rational expectations vs adaptive expectations: The case of Turkey

This paper estimates the Cagan type demand for money function for Turkish economy during the period 1986:1–1995:3 and tests whether Cagan's specification fits the Turkish data using an econometric technique assuming that forecasting errors are stationary. This paper also tests the hypothesis that monetary policy was implemented in aiming to maximize the inflation tax revenue. Finally, the Cagan model is estimated with the additional assumption of rational expectations for Turkey for the considered period. First version received: March 1998/final version received: October 1998     

Modeling the short-run costs of changes in water availability in a desert city: a modified input-output approach

This paper investigates the impact of change in sectoral water supply on employment, value-added output, and indirect business tax, in Maricopa County, Arizona using input–output model. We developed extended modified input–output approach that incorporates each source of water as a separate sector, and that allows for substitution between water sources, and estimated the economic impact of a change in surface water supplies under two scenarios. Scenario I assumes that total water supply/use decreases by 1%, but the reduction comes only from surface water use, holding groundwater use constant. Scenario II assumes that surface water supply/use in all industries decreases by 1%, and the reduction in surface water use is replaced by the exact amount of more expensive groundwater. We found that the magnitude of economic impact depends on consumer’s responsiveness to water price change. When price elasticity of water demand is relatively low (≤0.2), the economic impact of a 1% reduction in surface water supplies was smaller than under the first scenario. However, the more water users in all industries are responsive to a change in water price, the bigger are economic impacts in terms of reductions in jobs, value added, and indirect business taxes.     

Forecasting output gaps in the G-7 countries: the role of correlated innovations and structural breaks

Trend GDP and output gaps play an important role in fiscal and monetary policy formulation, often including the need for forecasts. In this article, we focus on forecasting trend GDP and output gaps with Beveridge-Nelson trend-cycle decompositions trend-cycle decompositions and investigate how these are affected by assumptions concerning correlated innovations and structural breaks. We evaluate expanding window, one-step-ahead forecasts indirectly for the G-7 countries on the basis of real GDP growth rate forecasts. We find that correlated innovations affect real GDP growth rate forecasts positively, while allowing for structural breaks works for some countries but not for all. In the face of uncertainty, the evidence supports that in making forecasts of trends and output gap policy-makers should focus on allowing for the correlation of shocks as an order of priority higher than unknown structural breaks.     

The role of domestic demand in the economic growth of Malaysia: a cointegration analysis

For the past four decades (1961-2000), the Malaysian economy grew at an impressive average rate of 6.8% per annum. The rapid growth has been attributed, in part, to the tremendous success in the export-oriented industrialization policy. Several empirical studies on export-led growth for Malaysia have, however, led to inconclusive and mixed results. This may be due to the exclusion of domestic demand in the bivariate or multivariate models used in the studies. This study re-examines the role of domestic demand in economic growth in Malaysia. Using a three-variable cointegration analysis, the study shows that there exist short run bilateral causalities among the three variables, which implies that both the export-led growth and domestic demand-generated growth hypotheses are at least valid in the short run. On the other hand, the results are not supportive of the export-led growth hypothesis in the long run. Instead, the highly significant positive impact of domestic expenditure on economic growth implies that use of domestic demand as the catalyst for growth is appropriate.     

Estimation of the public benefits of urban water supply improvements in Ethiopia: a choice experiment

Improving existing drinking water supply services in developing countries depends crucially on available financial resources. Cost recovery rates of these services are typically low, while demand for more reliable services is high and rapidly growing. Most stated preference-based demand studies in the developing world apply the contingent valuation method and focus on rural areas. This study examines household Willingness to Pay (WTP) for improved water supply services in a choice experiment in an urban area in Ethiopia, a country with the lowest water supply coverage in Sub-Saharan Africa. The design of the choice experiment allows estimation of the value of both drinking water supply reliability and safety. The estimated economic values can be used in policy appraisals of improved supply investment decisions. Despite significant income constraints, households are willing to pay up to 80% extra for improved levels of water supply over and above their current water bill. Women and households living in the poorest part of the city with the lowest service levels value the improvement of water quality most. As expected, also averting behaviour and expenditures play an important role.     

Measuring welfare losses from interruption and pricing as responses to water shortages: an application to the case of Seville

Supply cuts and pricing policies can be used to ration water. The appropriateness of a given policy depends on the losses in social welfare which it generates. We find some drawbacks with the only method in the previous literature which deals with the issue of measuring welfare losses under supply cuts. We propose an alternative method. We compare the welfare losses under supply cuts and a pricing policy during the drought period of 1992–1996 in Seville, Spain, using both methods, and find that the results vary widely from one method to the other.      

Friedman and Schwartz (1982) revisited: Assessing annual and phase-average models of money demand in the United Kingdom

Several studies have developed empirical models of U.K. mondy demand using the century of annual and phase-average data in Friedman and Schwartz (1982). The current paper evaluates key models from those studies, employing tests of constancy and encompassing. The evidence strongly favors an annual model from Ericsson, Hendry, and Prestwich (1998a), whereas models based on the phase-average data fare poorly.The first author is a staff economist in the Division of International Finace, Board of Governors of the Federal Reserve System, Washington, DC 20551 USA. The second author is Leverhulme Personal Research Professor of Economics at Nuffield College, Oxford OX1 1NF. The third author was a research assistan in the Division of International Finance at the Federal Reserve Board when this paper was initially drafted. The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System. The first author gratefully acknowledges the generous hospitality of Norges Bank, where he revised some of the material herein. The second author gratefully acknowledges financial support from the U.K. Economic and Social Research Council under grant R000234954. We wish to thank Clifford Attfield, David Demery, and Nigel Duck for compiling the data in Attfield, Demery, and Duck (1995); and Neva Kerbeshian, Helmut Lütkepohl, Jaime Marquez, and two anonymous referees for helpful comments. All numerical results were obtained using PcGive Professional Version 9.0: see Doornik and Hendry (1996). The data may be obtained from the Internet at http://wotan.wiwi.hu-berlin.de/oeknometrie/engl/data.html     

Offshoring and employment structure in the EU periphery: the case of Spain

The effects of offshoring of production have received a great deal of interest due to their implications on labour markets. However, the main theoretical predictions related to this issue are not always fulfilled in the empirical analysis; according to the Stolper–Samuelson theorem, there seems to be unanimous support for its effects in advanced countries whose production is relocated but not at all for recipient economies of the same. Additionally, there is a lack of empirical evidence in countries specialized in unskilled-labour tasks which are, at the same time, economies with higher relative wages in a global framework such as the Spanish economy. In this sense, the aim of this article is to analyse the effects of material offshoring in the relative composition of employment in the Spanish manufacturing industry during the period 1990–2007. Furthermore, we investigate the effects of immigrant labour and the temporary employment rate due to its increasing relevance in the Spanish economy during the period analysed. Using a generalized methods of moments (GMM) approach, our results suggest that, as opposed to most developed countries, offshoring in Spain has favoured the demand for blue-collar workers. In addition, we confirm that the increase in immigration and the increasing use of temporary contracts have enlarged the share of low-skilled workers.     

Management of an annual fishery in the presence of ecological stress: The case of shrimp and hypoxia

The emergence of ecosystem-based management suggests that traditional fisheries management and protection of environmental quality are increasingly interrelated. Fishery managers, however, have limited control over most sources of marine and estuarine pollution and at best can only adapt to environmental conditions. We develop a bioeconomic model of optimal harvest of an annual species that is subject to an environmental disturbance. We parameterize the model to analyze the effect of hypoxia (low dissolved oxygen) on the optimal harvest path of brown shrimp, a commercially important species that is fished in hypoxic waters in the Gulf of Mexico and in estuaries in the southeastern United States. We find that hypoxia alters the qualitative pattern of optimal harvest and shifts the season opening earlier in the year; more severe hypoxia leads to even earlier season openings. Failure to adapt to hypoxia leads to greater losses when the effects of hypoxia are more severe. However, rent gains from adapting fishery management to hypoxia are relatively small compared to rent losses from the hypoxia effect itself. This suggests that it is critical for other regulatory agencies to control estuarine pollution, and fishery managers need to generate value from the fishery resources through other means such as rationalization.     

Marketising the commons in Africa: the case of Ghana

The recent surge in the marketisation of the commons in Africa – especially of water bodies – warrants careful political economic analysis. Three questions remain intractable: (1) Were there markets in the beginning? If so, how have they transformed and if not, how did markets arise and transform over the years? (2) what are the outcomes of such markets for people, their livelihoods, and their environment? And (3) how to interpret the outcomes of water markets and whether water should be commodified at all. For new institutional economists, water markets have arisen because of the inferior nature of Indigenous or customary systems which are incapable of offering precisely what water markets offer Africa: economic and ecological fortunes. Using an institutional political economy approach and drawing on experiences in Ghana, the paper investigates the social history of marketisation of the commons and probes the effects of marketisation in terms of absolute, relative, and differential/congruent outcomes as well as the opportunity cost of the current water property rights regime. The empirical evidence shows that markets have been socially created through imposed and directed policies. Some jobs have been created through investment, but such employment is not unique to marketisation and private investment. Indeed, the private model of property rights has worsened the distribution of water resources not only within different property relations in Africa but also between diverse property relations. Water markets have been responsible for much displacement and trouble not only for communities but also nature. Overall, there is no necessary congruence between the promises made by new institutional economists and how communities experience water markets. Tighter regulations for the use of inland and transboundary water sources might temporarily halt the displacement of communities sparked by marketisation of the commons, but only one fundamental change can guarantee community well-being: to regard the access to and community control of water as constitutionally sanctioned human rights and as res communis.     

Complementarity between water pricing, water rights and local water governance: A Bayesian analysis of choice behaviour of farmers in the Krishna river basin, India

To ensure efficient water allocation and use, policy designers have adopted various strategies, including price setting, decentralising irrigation water management or improving water rights. Most of these strategies have been applied individually, without considering the complementary relationships between them. This paper uses a discrete choice model to analyse the scope for combinations of tools for irrigation water demand management and farmers' acceptance of these. In terms of local irrigation water governance, the presence or absence of collective irrigation water management, in the form of a Water Users Association, is considered. Water rights are specified in terms of the duration and quality of the entitlement and its transferability. Finally, four types of water pricing methods (area, crop, block and volumetric pricing) are considered. Using a choice experiment, we elicit the most preferred water pricing method, under different water rights situations, at different price levels and under various contexts for local irrigation water governance. Our results indicated that under conditions of improved water rights, preference for volumetric pricing increases, whilst the presence of a Water Users Association reduces this preference. Furthermore, it was found that using an appropriate combination of water demand management tools considerably increases the willingness to pay for a change in scenario.     

Assessing the role of futures position substitutability in a monthly slaughtered pork factor demand by US processors: a cointegrated VAR model approach

This article combines cointegrated VAR modelling with basic neoclassical production microeconomics in a new way that tests for, and illuminates the empirical nature of, the monthly US pork processing sector’s factor demand for slaughtered pork. Statistical evidence strongly suggests that the US pork processing sector has a Hicksian Cobb–Douglas slaughtered pork demand that arises from applying Shephard’s lemma to the sector’s cost function and that US pork processors treat slaughtered pork and related futures positions as close factor substitutes. In the wake of major and ongoing futures market events and trends, this study establishes and statistically tests a theoretical link between futures price movements and impacts on the underlying slaughtered pork market through monthly formation of US pork processors’ factor demand for slaughtered pork. Evidence suggests that demand agents shift between demands for the two substitutes based on movements in the slaughter/futures price ratio that results in a market-stabilizing cushion against sharp pork price movements such as those observed in the late-1990s. Statistical and diagnostic evidence suggests that our modelled non-experimental data and estimated Hicksian demand that arose from the cointegrated VAR model’s cointegration space met Haavelmo’s setting of passive variables and associated ceteris paribus conditions.