The effect of a tariff reform on the demand of water for residential uses: a panel data analysis of water consumption in Sardinia

A panel of 240 Sardinian towns in a 6-years' period is analyzed in order to identify the determinants of residential water demand and the effect of a tariff reform under conditions that can typically be found in Mediterranean and arid regions: quantity constraints imposed to sustain periods of drought; the presence of tourists in private residences that inflates the domestic consumption during summer months; inefficient management of the resource. Panel data techniques are employed to estimate the effect on the domestic demand of water of standard economic and structural variables, such as price, income, which are all found significant, in line with previous literature results. Moreover, we are able to estimate the effect that weather differences (both in spatial and temporal dimension), tourist presence in secondary residences, demographic characteristics and quantity restrictions have on the final consumption of water in the domestic sector. Furthermore we explicitly analyze the impact of the tariff reform in average consumption.