Exploring Water Consumption in Dhaka City Using Instrumental Variables Regression Approaches

The paper explores water consumption in Dhaka city for a better understanding of its usage and considers the implications of findings from a distributive rationale. Using 459 household survey data collected by the BRAC Institute of Governance and Development (BIGD), this study estimates income elasticities of water consumption after controlling the effects of other covariates including wealth proxies, location, household size, water bill and spatial zones using the instrumental variable regression (IVREG) and instrumental variable quantile regression (IVQREG) approaches. The latter has an additive advantage over the former as the IVQREG provides a more accurate picture of the relationship between water consumption with the income throughout the entire water consumption distribution. Using the fixed pay variable as an instrument, findings reveal strong evidence that income is endogenous. The IVQREG results show that income elasticities are heterogeneous and vary significantly across the water quantiles, implying inequality in water consumption. It also provides strong systematic evidence as income elasticity of water consumption decreases with the increase in percentile. Significant spatial inequality in water consumption from the IVREG approach disappears as IVQREG is used. This also strongly supports the systematic evidence obtained. Therefore, it is imperative to introduce different tariff structures among different water consumer groups for bringing equity in water consumption and revenue generation. However, Dhaka Water Supply & Sewerage Authority (DWASA) must ensure smart water meters before implementing such tariff structure as people face severe challenges while measuring residential water consumption.

Authors: Siddiquee, Muhammad Shahadat Hossain; Ahamed, Raihan
Type: Journal Article
Year: 2020