This paper attempts to estimate the household demand for water
supply1
in each income class in Thailand, and investigate the tax policy that
is effective to decrease both demand for water supply and differences in
ability to pay. Linear Expenditure System (LES) is utilized to estimate the
system of demand equations. Data used in this analysis come from two main
sources, i.e., the household expenditure data from the 2002 Household
Socio-Economic Survey (SES), and the regional commodity price data from
the Department of Business Economics under the Ministry of Commerce.
Households are classified into four income classes, i.e., poor, almost poor,
moderate, and rich. Commodities are divided into three main groups, i.e.,
water supply, food, and non-food. The results assure us that, water is a
necessary good. Moreover, they demonstrate that the price elasticities of
demand for water supply in each household income class are significantly
different.