Water utilization and water quality in endogenous economic growth

Abstract

Our study examines the effect of water utilization together with the effect of water quality on economic growth across countries. We constructed a panel of 177 countries covering the period of 1960-2009. We analyse two dependent variables, gross domestic product per capita and the average of five years of growth. The analysis is conducted using a fixed effects model and fixed effects with instrumental variables. We find that although water utilization affects growth, water quality also proves to be highly significant and affects growth in both the short and long run to a greater degree than water quantity.