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Demand for Piped and Non-piped Water Supply Services: Evidence from Southwest Sri Lanka

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  • Céline Nauges
  • Caroline Berg

Abstract

In many countries water supply is a service that is seriously underpriced, especially for residential consumers. This has led to a call for setting cost recovery policies to ensure that the tariffs charged for water supply cover the full cost of service provision. Identification of factors driving piped and non-piped water demand is a necessary prerequisite for predicting how consumers will react to such price increases. Using cross-sectional data of 1,800 households from Southwest Sri Lanka, we estimate water demand functions for piped and non-piped households using appropriate econometric techniques. The (marginal) price elasticity is estimated at − 0.15 for households exclusively relying on piped water, and at − 0.37 for households using piped water but supplementing their supply with other water sources. The time cost elasticity for households relying on non-piped water only is estimated at − 0.06 on average, but varying across sources. For both piped and non-piped households, we find evidence of substitutability between water from different sources. We discuss the implications of these results in terms of pricing policy.
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  • Céline Nauges & Caroline Berg, 2009. "Demand for Piped and Non-piped Water Supply Services: Evidence from Southwest Sri Lanka," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(4), pages 535-549, April.
    • Handle: RePEc:kap:enreec:v:42:y:2009:i:4:p:535-549
    DOI: 10.1007/s10640-008-9222-z
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    7. Tomas Havranek & Zuzana Irsova & Tomas Vlach, 2018. "Measuring the Income Elasticity of Water Demand: The Importance of Publication and Endogeneity Biases," Land Economics, University of Wisconsin Press, vol. 94(2), pages 259-283.
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    14. Costolanski, Peter & Elahi, Raihan & Iimi, Atsushi & Kitchlu, Rahul, 2013. "Impact evaluation of free-of-charge CFL bulb distribution in Ethiopia," Policy Research Working Paper Series 6383, The World Bank.
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