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Valuing water for Chinese industries : a marginal productivity assessment

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  • Wang, Hua
  • Lall, Somik

Abstract

Using plant-level data on more than 1000 Chinese industrial plants, the authors estimate a production function treating capital, labor, water, and raw material as inputs to industrial production. They then estimate the marginal productivity of water based on the estimated production function. Using the marginal productivity approach to valuing water for industrial use, they also derive a model and estimates for the price elasticity of water use by Chinese industries. Previous studies used water demand functions and total cost functions to estimate firms'willingness to pay for water use. They find that the marginal productivity of water varies among sectors in China, with an industry average of 2.5 yuan per cubic meter of water. The average price elasticity of industrial water demand is about -1.0, suggesting a great potential for the Chinese government to use pricing policies to encourage water conservation in the industrial sector. Increasing water prices would reduce water use substantially.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2236.

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Date of creation: 30 Nov 1999
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Handle: RePEc:wbk:wbrwps:2236

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Related research

Keywords: WaterConservation; Environmental Economics&Policies; Decentralization; Water and Industry; Economic Theory&Research; Water and Industry; Water Supply and Sanitation Governance and Institutions; Town Water Supply and Sanitation; Environmental Economics&Policies; Water Conservation;

References

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  1. Kessides, C., 1993. "Institutional Options for Provision of Infrastructure," World Bank - Discussion Papers, World Bank 212, World Bank.
  2. Steven Renzetti, 1993. "Examining the Differences in Self- and Publicly Supplied Firms' Water Demands," Land Economics, University of Wisconsin Press, vol. 69(2), pages 181-188.
  3. Lau, Lawrence J & Yotopoulos, Pan A, 1971. "A Test for Relative Efficiency and Application to Indian Agriculture," American Economic Review, American Economic Association, vol. 61(1), pages 94-109, March.
  4. Steven Renzetti, 1992. "Estimating the Structure of Industrial Water Demands: The Case of Canadian Manufacturing," Land Economics, University of Wisconsin Press, vol. 68(4), pages 396-404.
  5. Halvorsen, Robert, 1977. "Energy Substitution in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 59(4), pages 381-88, November.
  6. Kessides, C., 1993. "The Contributions of Infrastructure to Economic Development, A review of Experience and Policy Implications," World Bank - Discussion Papers, World Bank 213, World Bank.
  7. Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-68, August.
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Cited by:
  1. José Féres & Arnaud Reynaud, 2005. "Assessing the Impact of Environmental Regulation on Industrial Water Use: Evidence From Brazil," Discussion Papers 1079, Instituto de Pesquisa Econômica Aplicada - IPEA.
  2. Yerushalmi, Erez, 2012. "Measuring the administrative water allocation mechanism and agricultural amenities," The Warwick Economics Research Paper Series (TWERPS) 992, University of Warwick, Department of Economics.
  3. Kumar, Surender, 2004. "Analysing industrial water demand in India: An input distance function approach," Working Papers 04/12, National Institute of Public Finance and Policy.
  4. repec:snd:wpaper:1 is not listed on IDEAS
  5. Strzepek, Kenneth M. & Juana, James S. & Kirsten, Johann F., 2006. "Marginal Productivity Analysis of Global Inter-sectoral Water Demand," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25748, International Association of Agricultural Economists.

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