Household Demand for Improved Water Service in Urban Areas: The Case of Addis Ababa, Ethiopia
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2006-07
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Abstract
This paper analyzes determinates of households’ willingness to pay for improved water service, using the
contingent valuation method (CVM). The study used cross sectional data collected from 250 households
living in different areas of Addis Ababa, Ethiopia through single bounded elicitation format with an open
ended follow up question using a face-to face interview. The empirical models adopted by this study to
determine factors influencing households’ decisions to connect to the pipe water scheme are Probit and
Tobit models.
Results of the study revealed that respondents’ WTP is affected by a number of explanatory variables
including sanitation facility, water related disease and socio –economic variables like income, age, sex,
marital status, education level and family size of the respondent etc. The mean WTP for private connection
is found 20 cents per Baldi and 15.79 cents per Baldi from closed ended and open-ended question
respectively, which are well above the current subsidized tariff.
The following policy implications are derived from the study. First, the positive and significant relation
between sanitation facility and WTP implies that improving sanitation service could not be done alone rather
it has to go hand in hand with improvements in piped water supply provision. Finally, the revenue and
households’ welfare gain in changing the existing policy (low tariff with limited unreliable private service and
hence low level equilibrium) to a new (higher tariff with more and improved private connections) can be
huge.
Key Words: Willingness-to-pay, improved water service, sanitation facility, contingent valuation method,
Addis Ababa, Ethiopia
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Keywords
Willingness-to-pay, improved water service, sanitation facility, contingent valuation method