Policy Implications of Tariff Preferences in Rural Water Management: Insights from Chile

Francisco J. Fernández, Felipe Vásquez-Lavín, Diego Rivera, Francisco Hernández, Carlos Bopp, Nélyda Campos-Requena and Roberto D. Ponce
Authors registered in the RePEc Author Service: Felipe Antonio Vásquez Lavín

No 344377, IAAE 2024 Conference, August 2-7, 2024, New Delhi, India from International Association of Agricultural Economists (IAAE)

Abstract: A tariff is a crucial tool for managing rural water supply services. It helps cover the costs of operation, maintenance, and repair, ensuring the sustainability of these services. Unfortunately, due to suboptimal tariff structures, rural water systems lack the financial liquidity to handle unforeseen events. This puts them in a difficult position, especially with the increasing water demand and resource scarcity driven by climate change. Therefore, adjusting the current tariff settings is necessary to achieve financial and operational sustainability, balancing cost recovery with other social, economic, and environmental objectives. This study aims to determine how pricing components, such as fixed charges and variable costs, influence consumer acceptability of different tariff systems. Using a choice experiment, we evaluated Chilean rural water consumers' preferences for different tariff schemes. The results show that individuals are highly conservative regarding the price structure. Participants preferred maintaining existing tariffs, consistently favoring the status quo over alternative tariff structures. Significantly, the likelihood of selecting a new tariff structure is influenced more by alterations in the variable component than by changes in the fixed price of water. These findings provide valuable insights for achieving a balanced and sustainable approach to rural water management and help policy designs.

Keywords: Community/Rural/Urban Development; Consumer/Household Economics; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 22
Date: 2024-07-26
New Economics Papers: this item is included in nep-agr, nep-dcm, nep-env and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:ags:cfcp15:344377

DOI: 10.22004/ag.econ.344377

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