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Willingness to pay for improved water services: evidence from Peru

Author

Listed:
  • Francisco B. Galarza Arellano

    (Universidad del Pacífico)

  • Max Carbajal

    (Pontifical Catholic University of Peru)

  • Julio Aguirre

    (Universidad del Pacífico)

Abstract

We study the willingness to pay (WTP) for a large set of improvements in water service related to quality, continuity, and securing access for people with no house piped water during the COVID-19 pandemic. Using primary survey data from urban Peru, and the contingent valuation method, we estimate a mean WTP of around PEN 4.3 (USD 1.05), 3.7 and 1.8, respectively, for the aforementioned sets of improvements, with the combined WTP representing a 23% increase in the households’ water service monthly bill. The WTP for all sets of improvements is influenced by the expenditure in bottled water (a substitute for tap water, generally perceived as unsafe) and a proxy for household assets. The influence of the individual characteristics typically scrutinized by the literature (e.g., sex, age, and education) varies with the type of improvement examined. We find a significant heterogeneity in WTP across providers and calculate the users’ contribution to a water fund that could crowd-in the public investment in water services’ upgrades. We further discuss the implementation of such water fund.

Suggested Citation

  • Francisco B. Galarza Arellano & Max Carbajal & Julio Aguirre, 2024. "Willingness to pay for improved water services: evidence from Peru," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 26(3), pages 503-539, July.
    • Handle: RePEc:spr:envpol:v:26:y:2024:i:3:d:10.1007_s10018-023-00381-1
    DOI: 10.1007/s10018-023-00381-1
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    References listed on IDEAS

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    1. Lilia Rodríguez-Tapia & Daniel A. Revollo-Fernández & Jorge A. Morales-Novelo, 2017. "Household’s Perception of Water Quality and Willingness to Pay for Clean Water in Mexico City," Economies, MDPI, vol. 5(2), pages 1-14, April.
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    3. Andrés Gómez-Lobo & Mauro Gutiérrez & Sandro Huamaní & Diego Marino & Tomás Serebrisky & Ben Solís, 2024. "Access to water and COVID-19: a regression discontinuity analysis for the peri-urban areas of metropolitan Lima, Peru," Water International, Taylor & Francis Journals, vol. 49(1), pages 52-79, January.
    4. Karen Blumenschein & Glenn C. Blomquist & Magnus Johannesson & Nancy Horn & Patricia Freeman, 2008. "Eliciting Willingness to Pay Without Bias: Evidence from a Field Experiment," Economic Journal, Royal Economic Society, vol. 118(525), pages 114-137, January.
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    More about this item

    Keywords

    Access to tap water; Contingent valuation method; COVID-19; Quality; Willingness to pay;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I10 - Health, Education, and Welfare - - Health - - - General
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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