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

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  • 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
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    References listed on IDEAS

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    1. repec:ipg:wpaper:2014-484 is not listed on IDEAS
    2. 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.
    3. Marcus Wijnen & Benedicte Augeard & Bradley Hiller & Christopher Ward & Patrick Huntjens, 2012. "Managing the Invisible : Understanding and Improving Groundwater Governance," World Bank Other Operational Studies 17228, The World Bank.

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    Keywords

    Town Water Supply and Sanitation; Water and Industry; Water Use; Water Conservation; Water Supply and Sanitation Governance and Institutions;

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