Conference Agenda

Declining water resources under climate change, growing populations, and deteriorating water supply infrastructure impose increasing pressure on urban water supply systems. One billion people already face frequent public water supply interruptions, causing households and firms to rely on alternative modes of water service provision. Such conditions require consistent water demand management approaches across all sectors. Commercial water demand in low- and middle-income countries, however, has so far received scant attention in the econometric literature, despite its growing relevance. One particular challenge for demand estimation in developing countries is the use of multiple water sources. Here, we extend the discrete-continuous choice approach to estimate commercial demand for water from multiple supply sources. We apply the method to analyze the water demand of commercial establishments in water-scarce Jordan, where a highly intermittent public water supply system relies heavily on commercial water users for cost recovery, using survey data. Informal markets for expensive water deliveries via tanker trucks already provide 69.7% of all commercial water supply in Jordan, suggesting severe public water supply shortages. We find that commercial water demand is characterized by a positive output elasticity of 0.4 and by a negative price elasticity of -0.65 across all sources. This high negative price elasticity implies that firms in Jordan and similar settings are more responsive to water pricing policies than households, put poses challenges for water utilities’ cost recovery. Insights into commercial water demand are urgently needed to address the growing water sector challenges affecting cities around the world.