This study investigates the water demand of Indian manufacturing plants. It adopts an input distance function approach and approximates it by a translog form. Duality between cost function and input distance function is exploited to retrieve information concerning substitutability and the shadow price of water. The model is estimated, using linear programming approach, on a sample of 92 firms over the three years. The results show that the average shadow price of water is rupees 7.21 per kilolitre and the price elasticity of derived demand for water is high, -1.11 on average, a value similar to what has been found by other researchers working on developing countries (for example, China and Brazil). This indicates that water charges may be an effective instrument for water conservation.
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Length: 25 pages Date of creation: Mar 2004 Date of revision: Handle: RePEc:ind:nipfwp:12
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Find related papers by JEL classification: C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data D20 - Microeconomics - - Production and Organizations - - - General Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
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