Marginal productivity analysis of the global sectoral water use

Available evidence suggests that while global per capita freshwater supplies are dwindling due to rapid population growth, increased domestic economic activities, pollution and climate change, the supply of the resource is becoming inelastic. Therefore, the need for the efficient and sustainable use of the available water resources requires a switch from supply to demand management strategies. This study was designed to estimate the sectoral water demand function and marginal value of water use by each sector. Extracting data from GTAP 2006, UNIDO and from the FAO AQUASTAT, the study econometrically estimated the sectoral water demand functions for thirteen production sectors according to the ISIC codes. The estimated results indicate that the demand for water is price elastic, although the computed elasticities vary from sector to the other. This implies that water pricing could be a workable policy instrument to institute efficient and sustainable sectoral water use.