Water Consumption and Long-run Socio-economic Development: an Intervention and a Principal Component Analysis for the City of Milan

This paper analyses the evolution of water consumption in Milan during the twentieth century. However, dealing with a century time series raises some complicated statistic and econometric issues. To study the main research questions outlined by the literature, as the presence of consumption habits and the link between consumption and price, we use a quite original approach – based on intervention analysis and principal component analysis (PCA) – which seems to be more adequate than “regression-type” approaches to study a so long time series. Results indicate (1) how some events have modified the normal evolution of per-capita water consumption; (2) that per-capita water consumption is a very persistent series, namely, that water users should have well-developed consumption habits; (3) that per-capita consumption and water price present a strong negative correlation.