Understanding consumption and residential uses of water at the household level in Quito, Ecuador

Climate change, water scarcity, costly infrastructure projects, and inadequate pricing schemes and inefficient subsidies, are just a few reasons of concern for the current and future provision of potable water in many cities of the world. The understanding of consumer behavior may inform policy makers about cost-effective measures to achieve sustainable levels of water consumption. From an economic perspective, water pricing policies might be very effective to modify consumption patterns and reduce overconsumption. This paper estimates price and income elasticity's for the residential demand of water in Quito-Ecuador, a city whose per capita water consumption is well above the per capita consumption of most capital cities of Latin America. By using cross-section household data we find that water consumption in Quito is price and income inelastic with interesting differences among households that belong to different income levels. These results suggest the need of designing pricing policies for the residential consumption of water that are sensible to households’ socioeconomic characteristics. The analysis is complemented by the identification of the determinants of consumption of bottled water in Quito.