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Policy Implications of Tariff Preferences in Rural Water Management: Insights from Chile

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  • Fernández, Francisco J.
  • Vásquez-Lavín, Felipe
  • Rivera, Diego
  • Hernández, Francisco
  • Bopp, Carlos
  • Campos-Requena, Nélyda
  • Ponce, Roberto D.

Abstract

A tariff is a crucial tool for managing rural water supply services. It helps cover the costs of operation, maintenance, and repair, ensuring the sustainability of these services. Unfortunately, due to suboptimal tariff structures, rural water systems lack the financial liquidity to handle unforeseen events. This puts them in a difficult position, especially with the increasing water demand and resource scarcity driven by climate change. Therefore, adjusting the current tariff settings is necessary to achieve financial and operational sustainability, balancing cost recovery with other social, economic, and environmental objectives. This study aims to determine how pricing components, such as fixed charges and variable costs, influence consumer acceptability of different tariff systems. Using a choice experiment, we evaluated Chilean rural water consumers' preferences for different tariff schemes. The results show that individuals are highly conservative regarding the price structure. Participants preferred maintaining existing tariffs, consistently favoring the status quo over alternative tariff structures. Significantly, the likelihood of selecting a new tariff structure is influenced more by alterations in the variable component than by changes in the fixed price of water. These findings provide valuable insights for achieving a balanced and sustainable approach to rural water management and help policy designs.

Suggested Citation

  • Fernández, Francisco J. & Vásquez-Lavín, Felipe & Rivera, Diego & Hernández, Francisco & Bopp, Carlos & Campos-Requena, Nélyda & Ponce, Roberto D., 2024. "Policy Implications of Tariff Preferences in Rural Water Management: Insights from Chile," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344377, International Association of Agricultural Economists (IAAE).
    • Handle: RePEc:ags:cfcp15:344377
    DOI: 10.22004/ag.econ.344377
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    References listed on IDEAS

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    1. Koehler, Johanna & Thomson, Patrick & Hope, Robert, 2015. "Pump-Priming Payments for Sustainable Water Services in Rural Africa," World Development, Elsevier, vol. 74(C), pages 397-411.
    2. M. Genius & E. Hatzaki & E. Kouromichelaki & G. Kouvakis & S. Nikiforaki & K. Tsagarakis, 2008. "Evaluating Consumers’ Willingness to Pay for Improved Potable Water Quality and Quantity," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 22(12), pages 1825-1834, December.
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    Keywords

    Community/Rural/Urban Development; Consumer/Household Economics; Demand and Price Analysis;
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