评价中国工业用水: 边际生产率评估

\NPS 2x3; POLICY RESEARCH WORKING PAPER 2236 Valuing Water for Chinese The marginal productivity of water used for industry varies Industries among sectors in China, but there is great potential for the A Marginal Productivity Assessment Chinese government to save water by raising water prices to industry, to encourage Hua Wang water conservation. Somik Lall The World Bank Development Research Group Infrastructure and Environment H November 1999  POLICY RESEARCH WORKING PAPER 2236 Summary findings Using plant-level data on more than 1,000 Chinese and total cost functions to estimate firms' willingness to industrial plants, Wang and Lall estimate a production pay for water use. function treating capital, labor, water, and raw material They find that the marginal productivity of water as inputs to industrial production. They then estimate the varies among sectors in China, with an industry average marginal productivity of water based on the estimated of 2.5 yuan per cubic meter of water. production function. The average price elasticity of industrial water demand Using the marginal productivity approach to valuing is about -1.0, suggesting a great potential for the Chinese water for industrial use, they also derive a model and government to use pricing policies to encourage water estimates for the price elasticity of water use by Chinese conservation in the industrial sector. Increasing water industries. Previous studies used water demand functions prices would reduce water use substantially. This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to understand the economics of industrial pollution control in developing countries. Copies of the paper are available free from the World Bank, 1818 H Street, NW, Washington, DC 20433. Please contactRoulaYazigi, roomMC2- 533, telephone202-473-7176, fax202-522-3230, email addressryazigi@worldbank.org. Policy ResearchWorkingPapers are also posted on the Web at www.worldbank.org/research/workingpapers. The authors may be contacted at hwangl @worldbank.org or slalll@worldbank.org. November 1999. (23 pages) The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Produced by the Policy Research Dissemination Center  Valuing Water for Chinese Industries: A Marginal Productivity Assessment Hua Wang Somik Lall Development Research Group The World Bank Corresponding address: Dr. Hua Wang, The World Bank, MC 2-626, 1818 H St., N.W., Washington, DC 20433. Tel: 202-473-3255; Fax: 202-522-3230. Email: HWANG1 0worldbank.org   Valuing Water for Chinese Industries: A Marginal Productivity Approach I. Introduction Water use can be broadly divided into three categories. These are agricultural, industrial, and domestic uses. There have been numerous studies examining the demand and value of water for domestic or residential use.' However, the extension of this research to industrial sector and agricultural sector has been very limited. The dichotomy in water valuation research between domestic and industrial (and agricultural) use is heightened in developing countries, partly due to the lack of reliable information on water consumption and pricing at the firm level. The role of water on industrial production stems from its role as an intermediate public good with an active part in production processes that reduces the unit cost of production. Water use studies for industry were performed by estimating water demand models where the ratios of total expenditures to total quantity purchased were used as proxies for prices. Estimation of cost functions was also conducted where water was included as an input along with labor, capital, and materials, and the average cost of water consumption is used to determine the price. In these estimations, the quantity of water usually appeared on both sides of the demand equation which may introduce a simultaneity bias, and the use of average cost is neither consistent with economic theory that would suggest that firms respond to marginal prices in the decision making process. 2  In this study, we examine the value of water for industry by estimating an industrial production function with a data set of about two thousand Chinese industrial firms. The purpose of the study is to evaluate the contribution of water use to the industrial production process and to explore sector specific differences in the value of water. In the empirical analysis, water is treated as an input in the production process, along with capital, labor, energy, and raw materials. A model on price elasticity of water demand associated with the marginal productivity approach is also developed and estimated by assuming the price being set equal to marginal cost of water use. To our knowledge, this is the first study of using the marginal productivity approach to estimate value of water use by industry. Following this introduction, section II of this paper provides a brief review of previous research on industrial water demand and pricing, and presents the marginal productivity approach for valuing water of industrial use. A model for estimating the price elasticity of water demand is also provided in this section. The empirical study of Chinese practice of industrial water use is presented in section III. Section IV provides further discussions and concludes the paper. II. The Models Background Emerging realities of rapid urbanization in developing countries have necessitated improvements in the pricing system of water supply and its success depends on understanding the willingness to pay (WTP) and the demand for the infrastructure services. International experience shows that pricing and effluent charges are potential 3  instruments for industrial water savings by promoting investment in water recycling and water conservation technology (Bhatia and Falkenmark, 1993). As the potential for cost recovery seems to be directly related to service reliability and the role of water in the production process, it is also critical to understand the value of water in industrial production. Humplick, Kadat, and Madanat (1993) point out that most infrastructure provision in developing countries has been supply-driven resulting in non-performance from the user's point of view. However, the increasing costs of providing basic infrastructure to rapidly urbanizing areas during a period of budget declines, as well as a heightened interest in natural resource preservation and changing modes of infrastructure provision (public to private, or community based provision) has made it critical to examine demand driven approaches for infrastructure provision. In this context, it becomes important to get reliable estimates of the demand for water by understanding how water is valued by different and often competing user groups. Despite the ubiquity of water use among manufacturing firms, there are surprisingly few studies that are concerned with the structure of industrial water demand. This situation stands in markedly contrast to the exhaustive analysis that has been applied to investigating the industrial demand for capital, labor, and energy (for example, Field and Gerbenstein, 1980; Halvorsen, 1977). Industrial facilities use water for a variety of purposes. These include cooling and transporting intermediate inputs, producing steam, producing electricity, sanitation, and for inclusion in the firm's output (as in the food and beverage industries). There are only a handful of studies that have formally examined the role of water in industrial use. While 4  most of these have been conducted in developed countries where water utilities have readily available information on price and consumption parameters. The first generation of water use studies for industry were performed by estimating single equation water demand models where the ratio of total expenditures to total quantity purchased was used as a proxy for price (Turnoskvsky, 1969; Rees, 1969; and DeRoy, 1974). Extensions of these analyses have included the estimation of translog costs functions where water is included as an input along with labor, capital, and materials, and the average cost of water is used to determine the price (Grebenstein, 1979; Babin et. al, 1982). Most of these studies use the average cost of water as an indicator of price. Renzetti (1988) examined industrial water use by examining firm level data on water use and expenditures for British Columbia manufacturing firms in 1981. He considered four separate aspects of water use in the analysis: intake, treatment prior to use, internal re-circulation, and discharge. The prices of water treatment, re-circulation, and discharge were proxied by their respective average costs and output was measured by total labor hours. A Cobb-Douglas cost function was used to derive the demand function and it was found that intake price elasticity of water ranged from -0.12 (Petrochemicals) to -0.54 (Light Industries). Renzetti (1992) reports the general findings suggesting that water demand was inelastic. These estimation procedures are not flawless. For example, appearance of the quantity of water on both sides of the demand equation may introduce a simultaneity bias. The use of average cost mechanisms is also not consistent with economic theory that would suggest that firms respond to marginal prices in the decision making process. 5  In the following, a marginal productivity model will be developed for valuing industrial use of water and applied using data from two thousands of Chinese industrial firms, where water, as well as capital, labor, energy and raw materials, is treated as an input to a production function. A model on price elasticity of water demand associated with the marginal productivity approach are also developed and estimated. Our survey of the literature indicates that this is the first time such an analysis is being conducted with real data. Marginal Productivity There is a large body of literature on estimating production functions. The origin of the work on production functions can partly be attributed to the works of Cobb and Douglas (1928), who suggested the existence of laws of production governing the proportion of productive factors. The actual distribution of output into factors like capital and labor were consistent with estimated values of their parameters, and thus the productive factors received their marginal values. The Cobb-Douglas production function has been widely used in the empirical analyses of production and factor markets (see for example, Intriligator, 1965; Lau and Yotopoulos, 1971; and Nerlove, 1965). The function is well behaved in terms of monotonicity and convexity. However, there are important limitations associated with this function partly due to assumptions of additivity and homogeneity, as they imply that factor shares are constant and the elasticity of substitution as well as the Allen-Uzawa cross-partial elasticity of substitution are limited to unity. 6  In response to the additivity and homogeneity restrictions imposed by the Cobb- Douglas production function, Christensen, Jorgenson, and Lau (1973) proposed an alternate representation of the production possibility frontier which is a second order approximation of the quantities of inputs. The frontiers are quadratic in the logarithms and are called transcendental logarithmic or translog production functions. Christensen et al. show that the translog frontier is flexible by providing a greater variety of substitution of transformation patterns than those restricted by constant elasticity of substitution. The translog production function is widely used in the examination of production technology and factor markets (Chung, 1994). For example, using the translog production function, Berndt and Wood (1975) examined the structure of technology in US manufacturing and found that there are technological possibilities of substitution between energy and non energy inputs. Specifically, they find that energy is price responsive and energy and labor are substitutable to a limited extent. Halvorsen (1977) estimated a demand function using a translog function for US manufacturing and found that aggregate manufacturing demand for energy was highly price responsive but varied by type of energy. For the purposes of our study, we assume the existence of a twice differentiable aggregate production function for the industrial sector. In the production function, output Y is related to the availability of five inputs: capital (K), labor (L), water (W), energy (E), and other raw materials (M). We also assume that the production function is characterized by constant returns to scale and any technical change affecting K, L, W, E, and M is Hicks neutral. A production function with capital, labor, water, energy and materials as inputs can be specified as: (1) InY=A IK +nAnW+InE+A1nM+A In2K In2L+ in2W In'E In2M 2 2 2 2 2 I62 InKlnw+AI3 nKinE+f64 lnKInM+fl5 InLInW+I3,,jnL1nE+/6171nLInM