Determinants of Farmers’ Willingness to Pay for Irrigation Water of Lake Hawassa

Abstract

The contingent valuation method is applied to analyze the economic value of quality improved irrigation water. Based on random sampling technique, 220 sample households were selected to determine farmers’ preferences on how much they are willing to pay for quality improved irrigation water. The Heckman selection model was used to analyze the factors affecting households’ participation in the lake quality improvement and the valuation of the quality improved irrigation water. The valuation result shows that most respondents have reflected their willingness to pay for the lake quality improvement stating their mean WTP of Birr 311.44 for irrigation water per hectare, which is equivalent to US$17.30 per hectare. The analysis on the determinants of WTP shows that education, annual income, multiple uses of the lake, farm size, gender, and age of households are the significant variables explaining the participation in the resource quality improvement and the valuation of the quality improved irrigation water. Therefore, identification of such variables and their relative importance in the valuation helps to obtain households who are willing to pay maximum level for the lake quality improvement.

Keywords: Contingent Valuation, Heckman Model, Irrigation water, Willingness to pay