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Willingness to pay for improved water service: evidence from urban Peru

Author

Listed:
  • Galarza, Francisco

    (Universidad del Pacífico)

  • Carbajal Navarro, Max Arturo

    (Pontificia Universidad Católica del Perú)

  • Aguirre Montoya, Julio

    (Universidad del Pacífico)

Abstract

We study the willingness to pay (WTP) for a large set of improvements in water service related to water quality, continuity, and securing access for people with no house piped water during the COVID-19 pandemic. Using data from urban Peru, and the contingent valuation method, we estimate a mean WTP of around PEN 4.3 (USD 1.05), 3.7 and 1.8, respectively, for the aforementioned sets of improvements, with the combined WTP representing a 23% increase in the households’ water service monthly bill. We find that the WTP for all sets of improvements is influenced by the expenditure in bottled water (which acts as a substitute for tap water) and a proxy variable for household assets. The influence of the individual characteristics typically scrutinized by the literature (e.g. sex, age, and education) varies with the type of improvement examined. We find a significant heterogeneity in WTP across providers and calculate the users’ contribution to a water fund that could crowd-in the public investment in water infrastructure.

Suggested Citation

  • Galarza, Francisco & Carbajal Navarro, Max Arturo & Aguirre Montoya, Julio, 2022. "Willingness to pay for improved water service: evidence from urban Peru," Working Papers 22-03, Centro de Investigación, Universidad del Pacífico.
    • Handle: RePEc:pai:wpaper:22-03
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    References listed on IDEAS

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    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I10 - Health, Education, and Welfare - - Health - - - General
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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