Conference Agenda

The objective of this analysis is to investigate household water affordability across 26 municipalities in the state of Chihuahua, Mexico. This arid region faces significant challenges due to income disparities, diverse municipal pricing structures, and environmental constraints. The analysis is based on unique combination of data, including the National Survey of Household Income and Expenditures (ENIGH) for 2022, collected municipal pricing or rate structures, and a variety of both household level and regional control variables (e.g., weather and temperature). Household-level expenditure functions, for combined water and sewer services, are estimated econometrically, while lacking direct demand (consumption) data, the analysis allows derivation and estimation of both price and income elasticities of water demand. Results reveal that municipal water demand remains relatively price inelastic, as expected, but is approaching unitary elasticity, posing risks for utility revenue generation in raising rates. Consistent with Engel’s Law, expenditures are declining as a share of household income. There are significant affordability challenges, as against a sample median of 1.5%, low-income households spend an average of 4.49% of their income on water services, with some spending as much as 21.32%. These findings underscore the need for targeted policies, such as tiered pricing and subsidies, to reduce the financial burden on vulnerable households while balancing utility revenue, conservation, and sustainability goals.