Abstract

This paper estimates water price elasticity and examines spatial patterns of urban water management variables in 70 localities of more than 2 500 inhabitants of the six northern border Mexican states. By using ordinary least squares, spatial econometrics, Lagrange Multipliers, and exploratory spatial data analysis techniques, four variables were analyzed: water price (P), a Non-revenue water index (NRWI), total urban water connections, and water billed volume (BV). In accordance with the literature, we found that water demand is price sensitive but inelastic. Then price as an instrument for controlling water consumption does not offer an efficient alternative for reducing it, as water price increases would have to rise very high to reflect changes in consumption habits. Instead, it could be just a revenue-raising tool. Our findings also confirm a significant spatial autocorrelation in P and the NRWI. More interestingly, we found robust spatial effects on BV. This result implies that the performance of urban water utilities is determined by its counterparts' performance in the region. Given the results and characteristics of water resources in the region, we argue that management policies must consider a regional approach to be effective.

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