Determinants of Household's Willingness to Pay and Demand for Improved Water Services: A Contingent Valuation Study in Jijiga Town
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Date
2009-06
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A.A.U
Abstract
As many cities in developing countries, jijiga town faces problems in obtaining water for
domestic purposes. 81.3% of the households in jijiga town do not have private pipe
connection in their houses. Although jijiga water supply office is incurring a loss of 0.521
birr per one meter cubic of water produced, water supply is far below the existing water
demand in the toWIl.
Based on cross-sectional data collected from 251 households in jijiga town and using
contingent valuation method, this study investigates and assesses the determinants of
households' willingness to pay and demand for improved water services in jijiga city which
will provide an indication of the value that consumers place on improved water services.
The study will also provide guidance by enabling policy makers to design an appropriate
water pricing structure.
Two empirical models adopted by th is study are Probit and OL5 models. The Probit model
is used to analyze responses from single bounded close ended questions. The OLS model is
used to analyze responses from the open ended questions by identifying factors that affect
maximum WTP of the households for improved water service.
The result of the study shows that households spend 4.4% of their monthly income on
water, where households consume, on average only 132 liters per day. Households do not
satisfy the current water supply situation due to low quality, less quantity and unreliability
of the sources. Among six main social services presented, majority of respondents give the
first priority to water services. The mean WTP for improved water services is found to 0.36
Birr per jerican (a 20 liter backed) which is about 6.5 times more than the existing
authority's current tariff rate.
Both empirical models show that explanatolY variables, in come of the households, level of
satisfaction of the household, ownership of the house, reliability of water source, primGly
water source alld Respondents' perception about the quality of the existing water supply
sig nificantly affect the households' WTP for improved water service. Therefore, as a policy
implication, the study suggests consideration to be given such variables in designing and
implementing the policies of improved water supply service project.
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Keywords
Improved Water Services, Household's Willingness