Urban water demand for manufacturing, construction and service industries: a microdata analysis

Author:

Gracia-de-Rentería Pilar1,Barberán Ramón2,Mur Jesús3

Affiliation:

1. Department of Agrifood and Natural Resource Economics, Agrifood Research and Technology Centre of Aragon (CITA), 930 Montañana Avenue, 50059 Zaragoza, Spain and Agrifood Institute of Aragon – IA2, CITA-University of Zaragoza, 177 Miguel Servet Street, 50013 Zaragoza, Spain

2. Department of Public Economics, Faculty of Economics and Business, University of Zaragoza, 2 Gran Vía Street, 50005 Zaragoza, Spain and Environmental Science Institute (IUCA), University of Zaragoza, 12 Pedro Cerbuna Street, 50009 Zaragoza, Spain

3. Department of Economic Analysis, Faculty of Economics and Business, University of Zaragoza, María de Luna Street, 50018 Zaragoza, Spain

Abstract

Abstract This study analyses the industrial demand for urban water using a panel dataset of firms operating in the city of Zaragoza (Spain) and looking at three sectors (manufacturing, construction and services) disaggregated on 24 subsectors. Evidence in favour of using the marginal price rather than the average price is obtained, and the selection of the price is found to influence the value of the elasticities. Based on a translog cost function, the direct price elasticity of water (−0.86), the output elasticity (0.73) and the cross-price elasticities between water and capital, labour and supplies (being all of them substitutes) were estimated. By subsectors, the influence of price is only significant in those with a higher share of water in the total production cost. These results indicate that pricing can be used as a tool for managing water demand by promoting conservation of the resource. However, these results also indicate that the simultaneous use of other instruments is advisable to reinforce the impact of pricing policy on water consumption.

Funder

the Government of Aragón and the European Regional Development Fund

Publisher

IWA Publishing

Subject

Health, Toxicology and Mutagenesis,Water Science and Technology,Environmental Engineering

Reference49 articles.

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4. Ayuntamiento de Zaragoza 2012 Ordenanza Fiscal N.° 24.25 Tasa por la Prestación de Servicios Vinculados al Ciclo Integral del Agua 2012 (Fiscal Ordinance No. 24.25 Fee for the Provision of Services Related to the Integral Water Cycle 2012). Available from: https://www.zaragoza.es/ciudad/normativa/ordenanzas-fiscales/2012/ordenanza24-25.htm (accessed 5 December 2020).

5. Estimation of substitution possibilities between water and other production inputs;Am. J. Agric. Econ.,1982

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