Working paper sustainability and innovation S3/2007
In this paper we econometrically analyze the impact of several economic, environmental and social determinants for the average per capita demand for water and sewage in about 600 water supply areas in Germany. Besides prices, income and household size, we also consider the effects of population age, the share of wells, and rainfall and temperature during the summer months on water demand. We also attempt to explain regional differences in per capita residential water consumption, which is currently about 30 % lower in the new federal states than in the old states. Our estimate for the price elasticity of -0.229 suggests that the response of residential water demand in Germany is rather inelastic, but no significant difference could be found between both regions. In contrast, the income elasticity in the new states is found to be 0.685 which is more than double that of the old states. Differences in prices and income alone explain the largest part of the current gap in residential water use between the two regions. Our results further suggest that household size, the share of wells and summer rainfall have a negative impact on water demand. In contrast, higher age appears to be associated with higher water use. We also find (weak) evidence for an impact of rainfall but not of temperature on residential water use. Our findings imply that future research should include analyses of household- level data to further explore the effects of socio-economic determinants, and analyses of panel data to adequately study the effects of climate change on residential water use.