IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v69y2025i3d10.1007_s00181-025-02763-8.html
   My bibliography  Save this article

Valuation of household preferences for improved electricity services

Author

Listed:
  • Raul Jimenez Mori

    (IDB Invest)

Abstract

Low-quality infrastructure services persist in developing countries, a situation that mainly affects the poorest households. Informal access is common, and public services are heavily subsidized. This paper exploits choice experiments, specifically designed for both formal and informal users, with substantial variation in the received actual quality of services, to examine whether households in each situation are willing to pay for electricity service improvements. The analysis takes place in the urban Dominican Republic, a country with one of the highest rates of electricity theft and lowest quality service in Latin America. The results strongly indicate that households value service improvements, with informal users willing to pay an average of around US$9 and formal users willing to pay an extra 22% above their current electricity bill. The estimated valuations are significantly heterogeneous across households. This variance is mainly explained by household income, satisfaction with current electricity services, time allocation preferences, and household characteristics such as family size and dwelling size. These results indicate welfare losses equivalent to over 35% of the annual direct subsidy made by the Dominican government to the utilities.

Suggested Citation

  • Raul Jimenez Mori, 2025. "Valuation of household preferences for improved electricity services," Empirical Economics, Springer, vol. 69(3), pages 1153-1185, September.
    • Handle: RePEc:spr:empeco:v:69:y:2025:i:3:d:10.1007_s00181-025-02763-8
    DOI: 10.1007/s00181-025-02763-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-025-02763-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00181-025-02763-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Chakravorty, Ujjayant & Pelli, Martino & Ural Marchand, Beyza, 2014. "Does the quality of electricity matter? Evidence from rural India," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 228-247.
    2. Asher A. Blass & Saul Lach & Charles F. Manski, 2010. "Using Elicited Choice Probabilities To Estimate Random Utility Models: Preferences For Electricity Reliability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 421-440, May.
    3. Shaun McRae, 2015. "Infrastructure Quality and the Subsidy Trap," American Economic Review, American Economic Association, vol. 105(1), pages 35-66, January.
    4. B. Kelsey Jack & Grant Smith, 2015. "Pay as You Go: Prepaid Metering and Electricity Expenditures in South Africa," American Economic Review, American Economic Association, vol. 105(5), pages 237-241, May.
    5. Jimenez, Raul & Serebrisky, Tomas & Mercado, Jorge, 2016. "What does “better” mean? Perceptions of electricity and water services in Santo Domingo," Utilities Policy, Elsevier, vol. 41(C), pages 15-21.
    6. Abdullah, Sabah & Mariel, Petr, 2010. "Choice experiment study on the willingness to pay to improve electricity services," Energy Policy, Elsevier, vol. 38(8), pages 4570-4581, August.
    7. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, November.
    8. Di Tella, Rafael & Galiani, Sebastian & Schargrodsky, Ernesto, 2012. "Reality versus propaganda in the formation of beliefs about privatization," Journal of Public Economics, Elsevier, vol. 96(5), pages 553-567.
    9. Hensher, David A. & Shore, Nina & Train, Kenneth, 2014. "Willingness to pay for residential electricity supply quality and reliability," Applied Energy, Elsevier, vol. 115(C), pages 280-292.
    10. Fredrik Carlsson & Peter Martinsson, 2007. "Willingness to Pay among Swedish Households to Avoid Power Outages: A Random Parameter Tobit Model Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 75-90.
    11. Cameron, Trudy Ann & Quiggin, John, 1998. "Estimation Using Contingent Valuation Data from a "Dichotomous Choice with Follow-Up" Questionnaire: Reply," Journal of Environmental Economics and Management, Elsevier, vol. 35(2), pages 195-199, March.
    12. Mark Morrison & Craig Nalder, 2009. "Willingness to Pay for Improved Quality of Electricity Supply Across Business Type and Location," The Energy Journal, , vol. 30(2), pages 117-134, April.
    13. Mimmi, Luisa M. & Ecer, Sencer, 2010. "An econometric study of illegal electricity connections in the urban favelas of Belo Horizonte, Brazil," Energy Policy, Elsevier, vol. 38(9), pages 5081-5097, September.
    14. Raymond S. Hartman & Michael J. Doane & Chi-Keung Woo, 1991. "Consumer Rationality and the Status Quo," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 141-162.
    15. Mary Morrison & Marianne Fay, 2007. "Infrastructure in Latin America and the Caribbean : Recent Developments and Key Challenges," World Bank Publications - Books, The World Bank Group, number 7179.
    16. William Yu & Tooraj Jamasb & Michael Pollitt, 2009. "Willingness-to-Pay for Quality of Service: An Application to Efficiency Analysis of the UK Electricity Distribution Utilities," The Energy Journal, , vol. 30(4), pages 1-48, October.
    17. Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May.
    18. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
    19. Mark Morrison & Craig Nalder, 2009. "Willingness to Pay for Improved Quality of Electricity Supply Across Business Type and Location," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 117-134.
    20. Alok Bohara & Joe Kerkvliet & Robert Berrens, 2001. "Addressing Negative Willingness to Pay in Dichotomous Choice Contingent Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 20(3), pages 173-195, November.
    Full references (including those not matched with items on IDEAS)

    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. Jimenez Mori, Raul Alberto, 2017. "Are Blackout Days Free of Charge?: Valuation of Individual Preferences for Improved Electricity Services," IDB Publications (Working Papers) 8424, Inter-American Development Bank.
    2. Deutschmann, Joshua W. & Postepska, Agnieszka & Sarr, Leopold, 2021. "Measuring willingness to pay for reliable electricity: Evidence from Senegal," World Development, Elsevier, vol. 138(C).
    3. Meles, Tensay Hadush & Mekonnen, Alemu & Jeuland, Marc & Beyene, Abebe D. & Klug, Thomas & Hassen, Sied & Sebsibie, Samuel & Pattanayak, Subhrendu K., 2025. "Does the payment vehicle matter for valuing improved electricity reliability? A discrete choice experiment in Ethiopia," Utilities Policy, Elsevier, vol. 93(C).
    4. Kassahun, Habtamu Tilahun & Swait, Joffre & Jacobsen, Jette Bredahl, 2021. "Distortions in willingness-to-pay for public goods induced by endemic distrust in institutions," Journal of choice modelling, Elsevier, vol. 39(C).
    5. Aweke, Abinet Tilahun & Navrud, Ståle, 2022. "Valuing energy poverty costs: Household welfare loss from electricity blackouts in developing countries," Energy Economics, Elsevier, vol. 109(C).
    6. Amoah, Anthony & Ferrini, Silvia & Schaafsma, Marije, 2019. "Electricity outages in Ghana: Are contingent valuation estimates valid?," Energy Policy, Elsevier, vol. 135(C).
    7. Meles, Tensay Hadush & Lokina, Razack & Mtenga, Erica Louis & Tibanywana, Julieth Julius, 2023. "Stated preferences with survey consequentiality and outcome uncertainty: A split sample discrete choice experiment," EfD Discussion Paper 23-16, Environment for Development, University of Gothenburg.
    8. Huh, Sung-Yoon & Woo, JongRoul & Lim, Sesil & Lee, Yong-Gil & Kim, Chang Seob, 2015. "What do customers want from improved residential electricity services? Evidence from a choice experiment," Energy Policy, Elsevier, vol. 85(C), pages 410-420.
    9. Tensay Hadush Meles & Razack Lokina & Erica Louis Mtenga & Julieth Julius Tibanywana, 2023. "Stated Preferences with Survey Consequentiality and Outcome Uncertainty: A Split Sample Discrete Choice Experiment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(4), pages 717-754, December.
    10. Franceschinis, Cristiano & Thiene, Mara & Scarpa, Riccardo & Rose, John & Moretto, Michele & Cavalli, Raffaele, 2017. "Adoption of renewable heating systems: An empirical test of the diffusion of innovation theory," Energy, Elsevier, vol. 125(C), pages 313-326.
    11. Meles, Tensay Hadush & Mekonnen, Alemu & Beyene, Abebe D. & Hassen, Sied & Pattanayak, Subhrendu K. & Sebsibie, Samuel & Klug, Thomas & Jeuland, Marc, 2021. "Households' valuation of power outages in major cities of Ethiopia: An application of stated preference methods," Energy Economics, Elsevier, vol. 102(C).
    12. Morrissey, Karyn & Plater, Andrew & Dean, Mary, 2018. "The cost of electric power outages in the residential sector: A willingness to pay approach," Applied Energy, Elsevier, vol. 212(C), pages 141-150.
    13. Woo, C.K. & Ho, T. & Shiu, A. & Cheng, Y.S. & Horowitz, I. & Wang, J., 2014. "Residential outage cost estimation: Hong Kong," Energy Policy, Elsevier, vol. 72(C), pages 204-210.
    14. Musiliu O. Oseni, 2017. "Self-Generation and Households' Willingness to Pay for Reliable Electricity Service in Nigeria," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    15. Meles, Tensay Hadush, 2020. "Impact of power outages on households in developing countries: Evidence from Ethiopia," Energy Economics, Elsevier, vol. 91(C).
    16. Hyo-Jin Kim & Sung-Min Kim & Seung-Hoon Yoo, 2019. "Economic Value of Improving Natural Gas Supply Reliability for Residential Consumers in South Korea," Sustainability, MDPI, vol. 11(2), pages 1-10, January.
    17. Anna Alberini & evgenijs Steinbuks & Govinda Timilsina, 2022. "How Valuable is the Reliability of Residential Electricity Supply in Low-Income Countries? Evidence from Nepal," The Energy Journal, , vol. 43(4), pages 1-26, May.
    18. Zemo, Kahsay Haile & Kassahun, Habtamu Tilahun & Olsen, Søren Bøye, 2019. "Determinants of willingness-to-pay for attributes of power outage - An empirical discrete choice experiment addressing implications for fuel switching in developing countries," Energy, Elsevier, vol. 174(C), pages 206-215.
    19. Jimenez, Raul & Serebrisky, Tomas & Mercado, Jorge, 2016. "What does “better” mean? Perceptions of electricity and water services in Santo Domingo," Utilities Policy, Elsevier, vol. 41(C), pages 15-21.
    20. Amador, Francisco Javier & González, Rosa Marina & Ramos-Real, Francisco Javier, 2013. "Supplier choice and WTP for electricity attributes in an emerging market: The role of perceived past experience, environmental concern and energy saving behavior," Energy Economics, Elsevier, vol. 40(C), pages 953-966.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    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:spr:empeco:v:69:y:2025:i:3:d:10.1007_s00181-025-02763-8. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.