Estimating Residential Water Demand in a Relocation Area with Inadequate Piped Water System

• Main Author: Palanca-Tan, Rosalina
• Format: text
• Published: Archīum Ateneo 2020
• Subjects: income elasticity of demand; price elasticity of demand; residential water demand; water supply systems; Agricultural and Resource Economics; Economics; Environmental Studies
• Online Access: https://archium.ateneo.edu/economics-faculty-pubs/99; https://archium.ateneo.edu/cgi/viewcontent.cgi?article=1098&context=economics-faculty-pubs
• Institution: Ateneo De Manila University

This paper assesses household water demand and estimates a demand equation particularly for low-income households in the Philippines. The study uses survey data on the value and volume of household water purchases from different water providers in a government resettlement area. The paper provides empirical evidence on the impact of average water price on household water consumption, as well as the effects of household income and size on household water consumption. The study finds that households buying water from jetmatic pump wells and water tankers pay more than five times that of those served by the piped water system. This much higher cost of water from non-Water District sources could have constrained their water consumption to just about half that of the Water District customers. The estimated water demand equation reveals that demand for water significantly decreases with the average price of water but is only weakly responsive to price changes, with a price elasticity of –0.38. It is also found that water demand is not significantly affected by household income implying that it is not the households’ low income but the unavailability of efficient water providers that constrains consumption to a bare minimum. These findings confirm the high vulnerability of low-income households to inadequate and inefficient water providers, necessitating more prudent programming of the resettlement areas’ water supply system.