Economic growth and water use

Abstract

In recent years the issue of global water scarcity has attracted increasing attention within academia, non-governmental organizations and the media. The aim of this short note is to ascertain whether there is a systematic relationship between water use and income, and particularly whether an inverted U-shaped relationship exists, as has been found for other resources and pollutants. Using a new data set of water use, evidence of such a relationship is provided, suggesting that water use may benefit from composition and technique effects. While this finding appears optimistic, regional forecasts are made that suggest that levels of water use in developing regions will continue to increase for many years to come. The implications of these findings are discussed.

Notes

¹ For example, Ecological Economics and Environment and Development Economics have both devoted special issues to the EKC. A number of critiques of both the EKC methodology and the interpretation of EKCs have also arisen (Stern, 1998).

² The inverted U relationship has not been found for all environmental indicators, however.

³ The years are 1900, 1940, 1950, 1960, 1970, 1980, 1990, 1995 and 2000. In addition to water consumption, Shiklomanov also estimates the larger measure of water withdrawals. Since a large proportion of industrial water withdrawals are released almost immediately for further use downstream (e.g. cooling water for power stations), water consumption is the more appropriate measure here.

⁴ The income range in the sample is $513 to $27,331. Note that a time trend was also included in Equation 1, but was statistically insignificant.

⁵ Data from World Bank (1999).

⁶ Population and per capita income forecasts until 2010 are provided by the World Bank (2001). These were extended until 2020, although population growth rates were slightly reduced for each region.