An Aggregate Household Water Demand Model for the Western United States

Abstract

This paper presents the results of an aggregate water demand model using data from water suppliers in the 17 Western United States. The model uses data from readily available water use, price, water quality, climate, income and other socio-economic data. Household water demand models are estimated for the combined 17 western states and for individual states. The final water demand model includes the natural log of use per household per year as a function of the natural log of price, water quality, median household income, the annual average Palmer Drought Severity Index, household size, population density, percentage of population 65 and over, home ownership percentage, percentage of population with health insurance, and a state dummy variable. The price elasticity estimate for the 17-state model is −0.447 and state level elasticity estimates range from −0.114 in North Dakota to −0.775 in California. The aggregate model presented in this study is an improvement over previous studies because it is based on a large data set that covers a large geographic area. Greater variation in the magnitude of the explanatory variables included in the model supports robust econometric modeling and statistically significant results. The aggregate model can potentially be applied to a wide variety of areas in the western United States and can be used in a benefits transfer framework to estimate household water demand for areas within the western United States.