Estimating Residential Water Demand under a Progressive Price System: the Case of Amman City, Capital of Jordan

This paper illustrates the impact of socioeconomic factors on water consumption through a study of the demand for water by households, using cross-sectional data from 1200 households and from Amman city, the capital of Jordan. For water managers, it is essential to be able to predict the change in residential water demand from any policy that would involve some change in tariffs and/or income for household. The estimated price elasticity ranged between -0.81 and -0.97; that is a 10% increase in prices is more likely to result in water saving by 8.1% to 9.7%. Income elasticity is positive but very low. Income elasticity is estimated at about 0.08. In addition, family size, education level of household and the number of adults in the family have positive impacts on water consumption. In order to control residential water demand, water pricing policy is more likely to partially reach water saving objectives, as price elasticities are inelastic. Thus, pricing policy should be combined with other measures dealing with water scarcity problems. One may argue that the current combination of progressive pricing policy and the applied water restriction measures by water utility give the right signals to the consumers of Amman city about water scarcity