IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/3941.html
   My bibliography  Save this paper

Water markets, demand, and cost recovery for piped water supply services : evidence from Southwest Sri Lanka

Author

Listed:
  • Nauges,Celine
  • Van Den Berg,Caroline

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 providing for the service. Yet, the question arises on how consumers will react to such price increases. The authors illustrate the impact of price increases on consumption of piped water through a study of the demand for water of piped and non-piped households using cross-sectional data from 1,800 households in Southwest Sri Lanka. The (marginal) price elasticity is estimated at -0.74 for households exclusively relying on piped water, and at -0.69 for households using piped water but supplementing their supply with other water sources, with no significant differences between income groups. Those households that depend on non-piped water sources have a time cost elasticity (as a proxy for price elasticity) of only -0.06. The authors discuss the implications of these results in terms of pricing policy.

Suggested Citation

  • Nauges,Celine & Van Den Berg,Caroline, 2006. "Water markets, demand, and cost recovery for piped water supply services : evidence from Southwest Sri Lanka," Policy Research Working Paper Series 3941, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3941
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/09/14/090224b0828ad869/1_0/Rendered/PDF/Water0markets000Southwest0Sri0Lanka.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pattanayak, Subhrendu K. & van den Berg, Caroline & Yang, Jui-Chen & Van Houtven, George, 2006. "The use of willingness to pay experiments : estimating demand for piped water connections in Sri Lanka," Policy Research Working Paper Series 3818, The World Bank.
    2. Jasper M. Dalhuisen & Raymond J. G. M. Florax & JHenri L. F. de Groot & Peter Nijkamp, 2003. "Price and Income Elasticities of Residential Water Demand: A Meta-Analysis," Land Economics, University of Wisconsin Press, vol. 79(2), pages 292-308.
    3. S. Gaudin, 2006. "Effect of price information on residential water demand," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 383-393.
    4. Arbues, Fernando & Garcia-Valinas, Maria Angeles & Martinez-Espineira, Roberto, 2003. "Estimation of residential water demand: a state-of-the-art review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(1), pages 81-102, March.
    5. Strand, Jon & Walker, Ian, 2005. "Water markets and demand in Central American cities," Environment and Development Economics, Cambridge University Press, vol. 10(3), pages 313-335, June.
    6. Julie A. Hewitt & W. Michael Hanemann, 1995. "A Discrete/Continuous Choice Approach to Residential Water Demand under Block Rate Pricing," Land Economics, University of Wisconsin Press, vol. 71(2), pages 173-192.
    7. Nauges, Céline & Strand, Jon & Walker, Ian, 2009. "The value of water connections in Central American cities: a revealed preference study," Environment and Development Economics, Cambridge University Press, vol. 14(3), pages 349-370, June.
    8. Shin, Jeong-Shik, 1985. "Perception of Price When Price Information Is Costly: Evidence from Residential Electricity Demand," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 591-598, November.
    9. Nauges, Celine & Strand, Jon, 2007. "Estimation of non-tap water demand in Central American cities," Resource and Energy Economics, Elsevier, vol. 29(3), pages 165-182, September.
    10. NAUGES Céline & VAN DEN BERG Caroline, 2008. "Household's perception of water safety and hygiene practices : Evidence from Sri Lanka," LERNA Working Papers 08.09.253, LERNA, University of Toulouse.
    11. Marcello Basani & Barry Reilly & Jonathan Isham, 2004. "Water Demand and the Welfare Effects of Connection: Empirical Evidence from Cambodia," Middlebury College Working Paper Series 0429, Middlebury College, Department of Economics.
    12. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    13. Crane, Randall, 1994. "Water markets, market reform and the urban poor: Results from Jakarta, Indonesia," World Development, Elsevier, vol. 22(1), pages 71-83, January.
    14. Mansur, Erin T. & Olmstead, Sheila M., 2012. "The value of scarce water: Measuring the inefficiency of municipal regulations," Journal of Urban Economics, Elsevier, vol. 71(3), pages 332-346.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Auriol, Emmanuelle & Blanc, Aymeric, 2009. "Capture and corruption in public utilities: The cases of water and electricity in Sub-Saharan Africa," Utilities Policy, Elsevier, vol. 17(2), pages 203-216, June.
    2. repec:ipg:wpaper:2014-484 is not listed on IDEAS
    3. Marcus Wijnen & Benedicte Augeard & Bradley Hiller & Christopher Ward & Patrick Huntjens, 2012. "Managing the Invisible : Understanding and Improving Groundwater Governance," World Bank Publications - Reports 17228, The World Bank Group.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).
    2. Céline Nauges & Dale Whittington, 2010. "Estimation of Water Demand in Developing Countries: An Overview," The World Bank Research Observer, World Bank, vol. 25(2), pages 263-294, August.
    3. Havranek, Tomas & Irsova, Zuzana & Vlach, Tomas, 2016. "Publication Bias in Measuring the Income Elasticity of Water Demand," MPRA Paper 75247, University Library of Munich, Germany.
    4. 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.
    5. R. Quentin Grafton & Tom Kompas & Hang To & Michael Ward, 2009. "Residential Water Consumption: A Cross Country Analysis," Environmental Economics Research Hub Research Reports 0923, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University, revised Aug 2009.
    6. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    7. Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September.
    8. Liang Lu & David Deller & Morten Hviid, 2019. "Price and Behavioural Signals to Encourage Household Water Conservation: Implications for the UK," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 33(2), pages 475-491, January.
    9. Acuña, Guillermo, 2017. "Elasticidades de la demanda de agua en Chile [Elasticities of water demand in Chile]," MPRA Paper 82916, University Library of Munich, Germany.
    10. Marie-Estelle Binet & Fabrizio Carlevaro & Michel Paul, 2014. "Estimation of Residential Water Demand with Imperfect Price Perception," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(4), pages 561-581, December.
    11. 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.
    12. Nathan DeMaagd & Michael J. Roberts, 2020. "Estimating water demand using price differences of wastewater services," Working Papers 2020-1, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    13. Andrew C. Worthington & Mark Hoffman, 2008. "An Empirical Survey Of Residential Water Demand Modelling," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 842-871, December.
    14. Vallés-Giménez, Jaime & Zárate-Marco , Anabel, 2013. "Environmental taxation and industrial water use in Spain," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 25, pages 133-162.
    15. Worthington, Andrew C., 2010. "Commercial and Industrial Water Demand Estimation: Theoretical and Methodological Guidelines for Applied Economics Research/Estimación de la demanda de agua comercial e industrial: pautas teóricas y m," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 28, pages 237-258, Agosto.
    16. Guillermo Ignacio Acuña & Cristián Echeverría & Alex Godoy & Felipe Vásquez, 2020. "The role of climate variability in convergence of residential water consumption across Chilean localities," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(1), pages 89-108, January.
    17. Mónica Maldonado-Devis & Vicent Almenar-Llongo, 2021. "A Panel Data Estimation of Domestic Water Demand with IRT Tariff Structure: The Case of the City of Valencia (Spain)," Sustainability, MDPI, vol. 13(3), pages 1-26, January.
    18. Jake Wagner & Joseph Cook & Peter Kimuyu, 2019. "Household Demand for Water in Rural Kenya," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(4), pages 1563-1584, December.
    19. Liang Lu & David Deller & Morten Hviid, 2018. "Price and Behavioural Signals to Encourage Household Water Conservation in Temperate Climates," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2018-01, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    20. El-Khattabi, Ahmed Rachid & Eskaf, Shadi & Isnard, Julien P. & Lin, Laurence & McManus, Brian & Yates, Andrew J., 2021. "Heterogeneous responses to price: Evidence from residential water consumers," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).

    More about this item

    Keywords

    Town Water Supply and Sanitation; Water and Industry; Water Use; Water Conservation; Water Supply and Sanitation Governance and Institutions;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:3941. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.