Smallholder Farmer’s Willingness to Pay for Improved Irrigation Water: A Contingent Valuation Study in Koga Irrigation Project, Ethiopia

Abstract

This paper estimates the mean willingness to pay (WTP) of smallholder farmers for improved irrigation water using a contingent valuation method with a double bounded dichotomous choice question format in the case of the Koga irrigation project, Ethiopia. The mean and the total WTP of households and the major determinants of the WTP were estimated by applying seemingly unrelated bivariate Probit regression model. Data sources originated from primary and secondary sources. Primary data were collected from 140 randomly selected smallholder farm households through a structured questionnaire and focus group discussions using face-to-face interviews. Moreover, secondary data were collected from published and unpublished documents. The study findings have shown that the majority of the sample households has been affected by irrigation water scarcity problems, mainly because of soil erosion and deforestation. Furthermore, results underline that there is a positive WTP for improving irrigation water facilities. The response obtained from hypothetical market scenario indicates that households convey their WTP with a mean value of 128.88 Birr/hectare/year (US$6.78hectare/year) and the total WTP in the Koga irrigation command area is estimated to be 1,753,799.04 Birr/year (US$ 92,951.34). Moreover, the study identifies education level, household size, gender; first bid, total family income and cultivated land size are the main factors having a substantial effect on households' WTP of improved irrigation water. The study underlines that more attention should be given by government and other stakeholders for the implementation of irrigation water management practices in order to supply reliable irrigation water to the farmers. Furthermore, policy makers should develop and provide proper irrigation water pricing system, strengthen the existing soil and water conservation efforts and ensuring better soil and water conservation practices to manage the erosion problems in the catchment. Lastly, government and policy makers should consider the significant variables which have an impact in determining households' WTP.

Keywords: Willingness to pay; Contingent valuation method; Dichotomous choice; Koga irrigation; Ethiopia