A dynamic approach to analyze the evolution of water use efficiency across Spanish regions

We propose a dynamic approach to analyze water use efficiency across Spanish regions in the period 2001-2018. To measure efficiency, we implement several specifications of a slacks-based measure Data Envelopment Analysis (SBM-DEA) model considering different intertemporal aspects of the water cycle, ranging from depletion to wastewater treatment and recycling. Accounting for the last two components makes a crucial difference when determining the efficiency of regions. A dynamic Tobit model is applied to identify the main driving forces behind the observed trends in efficiency. We find a very strong autoregressive component, suggesting an important structural dimension. Efficiency is also positively related to competitiveness, while economic growth can have a positive effect though limited to the short run. The main managerial and policy implications for a country subject to strict water consumption limits and depending on wastewater treatment and recycling are analyzed.