Estimation of Static and Dynamic Demand Function of Household Water in Qazvin Province and Review of the Rate of Change in Consumer Behavior Over Time

Abstract

In this research, the demand function of drinkable water in Qazvin Province was estimated using dynamic and static methods. The required data were collected from the data of the provinces of Qazvin in the time period (1996-2016) and collected by referring to the statistical system of Statistics Center of Iran and the provincial planning and budget organization of Qazvin Province. The explanatory variables used in the model include household income, temperature (minimum and maximum), urban population, water price, rainfall, number of subscribers. The method used to estimate the static model, generalized least squares, and in the dynamic model, is a two-step generalized moment method. The results showed that the water price coefficient in the static and dynamic model is -0.217 and -0.19, respectively, which is a negative sign of the correctness of the demand law and less than one indicative of the low elasticity of water. The variable coefficient of household income in the static and dynamic model was 0.2 and 0.15, respectively, which positive and less than one, respectively, indicating the normality and necessity of water in the drinkable sector. In relation to the price of other goods, the coefficient was estimated in both negative models were -0.72 and -0.9, respectively, which indicates that water is a complementary product. Finally, the value of the variable coefficient was 0.5, which indicates that the demand for water is 0.5 times the demand for water last year.