An Econometric Model for Water Sector in Jordan

Abstract

Problem statement: This study argued that there is an economic approach to reduce water problems faced by Jordan. The study took into consideration the increasing population size, the declining rainfall, a deepening shortage of supply and increasing demand for water, the production of agricultural and industrial sectors, price of unit exports, and lack of financial resources. Approach: The framework for a tool which takes into consideration the links between economic growth and the availability of water was developed in this study, in the form of a dynamic simulation econometric model. The model served as a quantitative tool to evaluate the water policy measures and forecast the effect of future policy variables on the water status in Jordan. Results: Agricultural, industrial and other types of production are affected by water uses which in turn are influenced by production and other socioeconomic variables, including population size, the extent of production market, and the size of linkage effects working through certain increases in water consumption. The results also showed the model can be used to solve key issues related to the formulation and implementation of water policy. They also identified lessons for water management policy within a broad socio-economic perspective. Conclusions: First, with regard to production sector, a major effect can be attributed to the supply of water. Second, gross domestic products of agricultural, industrial and other sectors were found to be highly significant factors in influencing the supply of water. Finally, priorities for making the most of Jordan's water resources should be given to options affecting water-supply strategy which relates the supply of water to the level of production.