Analysis of water demand in Algeria
An optimal allocation of water resources is one of the challenges awaiting Algeria for years to come. With a water availability of less than 500 m3 per capita per year, Algeria is one of the countries that suffer most from the effects of water scarcity. Despite this deficit, water in Algeria is still subsidized by the state. Indeed, despite a cost of production estimated at 28.45 DA•m‐3, the selling price of water for the first bracket is 6.30 DA•m‐3 (equivalent to a subsidy of 77%), because section 138 of the Water Act of 2005 provides that «... the pricing of water services is based on the principles of financial stability, social solidarity, incentives for water saving and protection of water quality.» Therefore, these rates generate deficits for companies responsible for water management and send a false signal to consumers (who believe that it is free). In this paper we propose a contribution to improving the management of this vital service through knowledge of factors determining this function. To achieve this, we estimated a function of water demand with a sample of 172 consumers over a period of 45 quarters, using dynamic panel estimates. These estimates show that the consumers in the province of Bejaia are not very sensitive to price changes. Short-term price elasticity, estimated by the method, developed by Nordin (1976), gives a value of -0.67 (-0.72 elasticity for long-term). The income elasticity estimated with this method gives a value of 0.39. In other words, an increase in income of 1% generates an additional demand of 0.39%. JEL classification: L95, Q25, D12