Determinants of water pricing – a regression analysis with cross-country data

As water has become a scarce resource, international organisations predict that the problem of water scarcity will become acute. This study investigates the role of socio-political factors such as the forward-looking water pricing hypothesis and the impact of globalisation as determinants of water pricing in 22 selected countries. Our statistical estimation results have two important policy implications. First, the statistical significance of the variable for the forward-looking water pricing hypothesis indicates the need for further debate and discussion about current and predicted water shortage problems at an international level. Second, the estimation results also indicate that globalisation via membership of international environmental organisations and promoting the activities of multinational companies should be encouraged, so that countries can enjoy positive information spill-overs and mutual knowledge acquisition through their interaction with the rest of the world.