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The welfare costs of unreliable water service

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Author Info

  • Baisa, Brian
  • Davis, Lucas W.
  • Salant, Stephen W.
  • Wilcox, William

Abstract

Throughout the developing world, many water distribution systems are unreliable. As a result, it becomes necessary for each household to store its own water as a hedge against this uncertainty. Since arrivals of water are not synchronized across households, serious distributional inefficiencies arise. We develop a model describing the optimal intertemporal depletion of each household's private water storage if it is uncertain when water will next arrive to replenish supplies. The model is calibrated using survey data from Mexico City, a city where many households store water in sealed rooftop tanks known as tinacos. The calibrated model is used to evaluate the potential welfare gains that would occur if alternative modes of water provision were implemented. We estimate that most of the potential distributional inefficiencies can be eliminated simply by making the frequency of deliveries the same across households which now face haphazard deliveries. This would require neither costly investments in infrastructure nor price increases.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 92 (2010)
Issue (Month): 1 (May)
Pages: 1-12

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Handle: RePEc:eee:deveco:v:92:y:2010:i:1:p:1-12

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Water supply uncertainty Water storage Distributional inefficiency;

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References

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  1. Stephen W. Salant & Dale W. Henderson, 1976. "Market anticipations, government policy, and the price of gold," International Finance Discussion Papers 81, Board of Governors of the Federal Reserve System (U.S.).
  2. David Levhari & Leonard J. Mirman, 1980. "The Great Fish War: An Example Using a Dynamic Cournot-Nash Solution," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 322-334, Spring.
  3. Fortin, Bernard & Lacroix, Guy, 1997. "A Test of the Unitary and Collective Models of Household Labour Supply," Economic Journal, Royal Economic Society, vol. 107(443), pages 933-55, July.
  4. Long, Ngo Van, 1975. "Resource extraction under the uncertainty about possible nationalization," Journal of Economic Theory, Elsevier, vol. 10(1), pages 42-53, February.
  5. 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.
  6. Alcazar, Lorena & Lixin Colin Xu & Zuluaga, Ana Maria, 2000. "Institutions, politics, and contracts : the attempt to privatize the water and sanitation utility of Lima, Peru," Policy Research Working Paper Series 2478, The World Bank.
  7. Christopher Timmins, 2002. "Measuring the Dynamic Efficiency Costs of Regulators' Preferences: Municipal Water Utilities in the Arid West," Econometrica, Econometric Society, vol. 70(2), pages 603-629, March.
  8. Whittington, Dale & Lauria, Donald T. & Mu, Xinming, 1991. "A study of water vending and willingness to pay for water in Onitsha, Nigeria," World Development, Elsevier, vol. 19(2-3), pages 179-198.
  9. Salant, Stephen W & Henderson, Dale W, 1978. "Market Anticipations of Government Policies and the Price of Gold," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 627-48, August.
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Citations

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Cited by:
  1. Johanna CHOUMERT & Claudine UWERA & Jesper STAGE, 2014. "Access to water as a determinant of rental values: A hedonic analysis in Rwanda," Working Papers 201401, CERDI.
  2. Karen Fisher-Vanden & Erin T. Mansur & Qiong (Juliana) Wang, 2012. "Costly Blackouts? Measuring Productivity and Environmental Effects of Electricity Shortages," NBER Working Papers 17741, National Bureau of Economic Research, Inc.
  3. Sheila M. Olmstead, 2010. "The Economics of Water Quality," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(1), pages 44-62, Winter.
  4. Agha Akram & Sheila Olmstead, 2011. "The Value of Household Water Service Quality in Lahore, Pakistan," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(2), pages 173-198, June.
  5. Vásquez, William F., 2011. "Household preferences and governance of water services: A hedonic analysis from rural Guatemala," IFPRI discussion papers 1152, International Food Policy Research Institute (IFPRI).

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