Value of Household Water Service Quality in Lahore, Pakistan

• Published in: Environmental & resource economics Vol. 49; no. 2; pp. 173 - 198
• Main Authors: Akram, Agha Ali, Olmstead, Sheila M
• Format: Journal Article
• Language: English
• Published: Dordrecht Dordrecht : Springer Netherlands 01.06.2011; Springer Netherlands; European Association of Environmental and Resource Economists; Springer Nature B.V
• Series: Environmental & Resource Economics
• Subjects: Child mortality; Cities; Contingent valuation; Cost analysis; Developing countries; Drinking water; Drinking water quality; Economic Policy; Economics; Economics and Finance; Environmental Economics; Environmental Law/Policy/Ecojustice; Environmental Management; Environmental studies; Estimates; Family income; Freshwater resources; Groundwater; household income; Households; Informal economy; Interruption; LDCs; Pakistan; Population growth; Populations; Q21; Q25; Quality of service; Sanitation; Studies; Suppliers; Valuation; Water demand; Water quality; Water supplies; Water supply; Water treatment; Willingness to pay; Pakistan; Q21; Q25; Willingness to pay; Water demand; Contingent valuation; Drinking water quality
• ISSN: 0924-6460; 1573-1502
• DOI: 10.1007/s10640-010-9429-7

Most existing literature focuses on the benefits of establishing basic drinking water access for unserved populations, the extensive water supply margin. In contrast, this article examines the intensive margin--the benefits of improving water service to under-served households, a growing population in developing country cities. We use contingent valuation to estimate willingness to pay (WTP) for improved piped water quality and reductions in supply interruptions among a sample of 193 households in Lahore, Pakistan. The distribution of WTP is described using parametric and non-parametric models. Results indicate that households in Lahore are willing to pay about $7.50 to $9 per month for piped water supply that is clean and drinkable directly from the tap--comparable to the monthly cost of in-home water treatment, and about three to four times the average monthly water bill for sample households using piped water. Estimates of WTP for reducing supply interruptions are both smaller and more difficult to interpret, since a significant fraction of the estimated WTP distribution for supply improvements is negative. All of our WTP estimates are well below 4% of monthly household income, the World Bank's benchmark upper bound for affordable water service.