Welfare Calculations in Models of the Demand for Sanitation

Empirical and theoretical research on the demand for health inputs has been, and still is, extensive. However, much of the focus of discrete choice studies has been on the effects of various attributes on household choice of e.g. health care provider and little attention has been paid to environmental health related inputs and welfare analyses of price changes. Policymakers and donor agencies involved in sanitation programmes will typically be interested in the welfare implications of different policy alternatives. Contrary to earlier studies the purpose of the present paper is to analyse the welfare implications of price changes for certain sanitation-related inputs. In addition, a comparison of the welfare estimates derived from the ''standard'' approach, i.e. the conditional logit model and the more novel approach i.e. the random parameter/mixed logit model is undertaken. The findings suggest that model choice indeed have implications for the results since the welfare estimates from the two models differ quite remarkably.