Abstract
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.
Highlights
Water is an essential resource for socio-economic development, human life sustenance, and ecosystem preservation
The first column indicates that a 1% increase in fixed cost of self-supplied groundwater (FCS) and variable unit cost of self-supplied groundwater (VUCS) reduces the probability of self-supply groundwater by −0.0122% and −0.0060%, respectively
Based on a sample of 2579 manufacturing and service companies located in the city of Zaragoza (Spain), which have access to drinking water through the public-supply network and can opt for self-supply groundwater, we analyzed the determining factors in the decision whether or not to use groundwater and analyzed the factors influencing the decision on the amount of groundwater used
Summary
Water is an essential resource for socio-economic development, human life sustenance, and ecosystem preservation. It is necessary to ensure the sustainability of water resources and their efficient and equitable allocation to enable an acceptable level of economic and social welfare. Population growth, urbanization, water pollution, and unsustainable development are all increasing pressure on water resources across the world, and that pressure is further exacerbated by climate change [1]. Pressure affects both surface water and groundwater. Groundwater comprises a much larger freshwater volume than surface water and it is increasingly important for water security in many countries and regions, but many aquifers are subject to unsustainable abstraction levels and pollution [2,3]. The United Nations [4] reports that groundwater
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