Estimation of Total Economic Value of Domestic Water Supply Services: An Application of Contingent Valuation Method For Haik Town
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Date
2011-07
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Addis Ababa University
Abstract
This study analyzes the willingness to pay for improved water supply services by households for
Haik town. The Contingent Valuation Method (CVivf) was utilized to obtain estimates of
Willingness to Pay (WTP) for improved domestic water supply services to current and future
generations. Analysis of bid function underlying the WTP re.ljJonses was undertaken, with a
range of explanatory variables being investigated In this contingent valuation survey, we
adopted a dichotomous choice with follow-up debrieflng questions, as well as open-ended
follow-up question to model individual's WTP. Descriptive analysis as well as two analytical
models namely Tobit and Probit model and Ordinmy Least Squares (OLS) were used A sample
of 145 household heads was taken. We used stratified sampling method followed by simple
random sampling to select the required sample. The survey was conducted using a face- to- face
interview to the selected sample of household heads. The study results show that the mean
annual WTP of Total Economic Value (TEV) of improved domestic water supply services is
about 239.28 Birr per annum, which seems to be 0 significant amount based on key
socioeconomic explanatory variables suggested by economic theory. The mean WTP values are
24.75 and 27. 37 cents per Baldi (a 20 liter bucket) for the improved water supply service as
calculated Fom the Tobit and Probit models, respectively. The total WTP amount Fom the total
of 4,590 households in the study area of Haik town is Birr 1,136.03 per Baldi or Birr 4,544.12
per a day at average service lee of 24. 75 cent per Baldi. Accordingly, the mean WTP is unlikely
to be a realistic value that can gauge the TE V of improved domestic water supply services.
However, the study also shows that the TEV of improved domestic water supply services is likely
to be difficult to estimate.
Keywords: Contingent valuation method; Economic value; Willingness to Pay; Domestic water
supply services; Haik town.
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Keywords
Contingent valuation method, Economic value, Willingness to Pay, Domestic water supply services, Haik town