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Open AccessArticle

The Groundwater Demand for Industrial Uses in Areas with Access to Drinking Publicly-Supplied Water: A Microdata Analysis

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Agrifood Research and Technology Centre of Aragon (CITA), Montañana Avenue, 930, 50059 Zaragoza, Spain
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Department of Public Economics, Faculty of Economics and Business, University of Zaragoza, Gran Vía Street, 2, 50005 Zaragoza, Spain
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Environmental Science Institute (IUCA), University of Zaragoza, Pedro Cerbuna Street, 2, 50009 Zaragoza, Spain
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Department of Economic Analysis, Faculty of Economics and Business, University of Zaragoza, María de Luna Street, Campus Río Ebro, 50018 Zaragoza, Spain
*
Author to whom correspondence should be addressed.
Water 2020, 12(1), 198; https://doi.org/10.3390/w12010198
Received: 3 December 2019 / Revised: 2 January 2020 / Accepted: 7 January 2020 / Published: 10 January 2020
(This article belongs to the Special Issue Sustainable Management of Urban Water Resources)
This study examines, from an economic perspective, the factors influencing the decision of companies to use groundwater or not, in a context in which they have access to drinking publicly-supplied water and can also opt for self-supplying groundwater, and then estimates its groundwater demand. The Heckman two-stage model is applied, using microdata of a sample of 2579 manufacturing and service companies located in Zaragoza (Spain). The results of the first stage show that companies have economically rational behavior in the choice of their water supply sources: the probability to capture groundwater depends negatively on its cost and positively on the cost of publicly-supplied water. The results of the second stage indicate that the demand for self-supplied groundwater is normal, but inelastic (elasticity of −0.50), and that self-supplied and publicly-supplied water are substitutive inputs, where the cross-elasticity of the demand is much higher than the direct elasticity. These results warn of the undesirable consequences, on overall efficiency and environmental sustainability, of the lack of a volumetric fee that charges companies with the environmental and resource costs caused by the extraction of groundwater and emphasize the need for integrated management of all water resources.
Keywords: groundwater; Heckman model; self-supply; water demand; water economics; industry groundwater; Heckman model; self-supply; water demand; water economics; industry
MDPI and ACS Style

Gracia-de-Rentería, P.; Barberán, R.; Mur, J. The Groundwater Demand for Industrial Uses in Areas with Access to Drinking Publicly-Supplied Water: A Microdata Analysis. Water 2020, 12, 198.

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