An econometric study of industrial water demands in British Columbia, Canada

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Abstract
Despite the importance of water use by the industrial sector, little economic research has been conducted to study the nature of industrial water demands. This paper uses a relatively simple model of input demands to test whether industrial water use is sensitive to changes to input prices or the level of production. Demands for four aspects of industrial water use (intake, treatment prior to use, recirculation, and treatment prior to discharge) are estimated as a system of simultaneous equations. The data set is a 1981 cross section of firm level observations on water use and expenditure. Empirical results are reported for four manufacturing subgroups: petrochemicals, heavy industry, forest industry, and light industry. Intake price elasticities range from −0.12 to −0.54 and intake elasticities with respect to the level of output range from 0.76 to 1.90. The cross price elasticity between intake and recirculation is positive for all subgroups (indicating substitutability) and ranges from 0.14 to 0.26.

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