Demand for piped and non-piped water supply services: evidence from southwest Sri Lanka

Celine Nauges and Caroline van den Berg

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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 service provision. Identification of factors driving piped and non-piped water demand is a necessary prerequisite for predicting how consumers will react to such price increases. Using cross-sectional data of 1,800 households from Southwest Sri Lanka, we estimate water demand functions for piped and non-piped households using appropriate econometric techniques. The (marginal) price elasticity is estimated at − 0.15 for households exclusively relying on piped water, and at − 0.37 for households using piped water but supplementing their supply with other water sources. The time cost elasticity for households relying on non-piped water only is estimated at − 0.06 on average, but varying across sources. For both piped and non-piped households, we find evidence of substitutability between water from different sources. We discuss the implications of these results in terms of pricing policy.

Keywords: DEMAND ESTIMATION; HOUSEHOLD WATER USE; PIPED AND NON PIPED WATER SERVICES; PRICE ELASTICITY; PRICING POLICY; CENTRAL-AMERICAN CITIES; INCREASING BLOCK RATES; WILLINGNESS-TO-PAY; DEVELOPING-COUNTRIES; INDONESIA; MARKETS; CHOICE; DEMANDE; VALUATION; PRICE; MODEL (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (20)

Published in Environmental and Resource Economics, 2009, 42 (4), pp.535-549. ⟨10.1007/s10640-008-9222-z⟩

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Journal Article: Demand for Piped and Non-piped Water Supply Services: Evidence from Southwest Sri Lanka (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02655330

DOI: 10.1007/s10640-008-9222-z

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