Determinants of Urban Residential Water Demand in Libya

Abstract

This article analyzes the effect of several economic, environmental and social determinants for the per capita demand for water in Libya. Besides prices, income and population size, the article reflects the impact of urban population size, the temperature, summer temperature, and precipitation. The article also explores why the current per capita residential water demand in the urban areas is about more than in the other areas in Libya. In this study, the econometric model based on E-views method, instrumental-variable procedures, the ARDL model and the demand equation are applied. The co-integration analysis has shown a significant positive effect of temperature on water demand over the short and long term with partial flexibility of long-term temperature (5.44). Also, there is a positive relationship between rainfall and water demand in the long term and its less impact in the short term. There is a significant positive relationship between urban population and water demand. The greater urban population is greater the water demand and vice versa, partial flexibility of the urban population in the long term is at 0.23. On the other hand, there is a significant negative effect of income on water demand. Therefore, water demand is inflexible to changes in income. The study demonstrated that there is a negative effect on water price in relation to water demand. The estimated long-term variable of water value is 220.98, indicates that if the water price increases by 100%, the demand for water will go down by 221%.