Urban water demand with fixed volumetric charging in a large municipality: the case of Brisbane, Australia*

Authors

  • Mark Hoffmann,

    1. School of Economics and Finance, Queensland University of Technology, Brisbane, Queensland, Australia
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  • Andrew Worthington,

    1. School of Accounting and Finance, University of Wollongong, Wollongong, New South Wales, Australia
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  • Helen Higgs

    1. Department of Accounting, Finance and Economics, Griffith University, Brisbane, Queensland, Australia
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    • Mark Hoffmann (email: mark.hoffman@student.qut.edu.au) is an Honours graduate of the School of Economics and Finance, Queensland University of Technology, Brisbane, Queensland, Australia. Andrew Worthington (email: andreww@uow.edu.au) is Professor, School of Accounting and Finance, University of Wollongong, Wollongong, New South Wales, Australia. Helen Higgs (email: h.higgs@griffith.edu.au) is Senior Lecturer, Department of Accounting, Finance and Economics, Griffith University, Brisbane, Queensland, Australia.


  • *

    The authors would like to thank participants at the 34th Conference of Economists, Melbourne, David Pannell and two anonymous reviewers for helpful comments on an earlier version of this paper. The financial support of the Queensland Government through the Department of Natural Resources and Energy, and the assistance of the Brisbane City Council in providing the requisite data, is also gratefully acknowledged.

Abstract

This paper uses suburb-level quarterly data to model residential water demand in Brisbane, Australia, from 1998 to 2003. In this system, residential consumption is charged using a fixed annual service fee with no water entitlement followed by a fixed volumetric charge per kilolitre. Water demand is specified as average quarterly household water consumption and the demand characteristics include the marginal price of water, household income and size, and the number of rainy and warm days. The findings not only confirm residential water as price and income inelastic, but also that the price and income elasticity of demand in owner-occupied households is higher than in rented households. The results also show that weather, particularly summer months and the number of rainy days, exerts a strong influence on residential water consumption.

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