Economic Values of Irrigation Water in Wondo Genet District, Ethiopia: An Application of Contingent Valuation method

Abstract

The study attempts to determine the economic value of irrigation water in Wondo Genet area by eliciting households’ willingness to pay (WTP) using contingent valuation method (CVM) in the form of double bounded closed ended WTP questions with open ended follow up questions. Bivariate probit and probit models were applied to determine the mean and factors affecting willingness to pay for irrigation water, respectively. A sample of 154 households was randomly selected, and the survey was used for face to face interviews. The descriptive analysis shows that the irrigation water from Wosha and Werka rivers of Wondo Genet area is insufficient to produce cash crop and domestic use especially during the dry season. That is, 92.05% of the respondents reported that the reasons attributed to the insufficient availability of irrigation water for irrigation purpose were inequitable water distribution, population pressure, deforestation and illegal dweller.  Furthermore, the econometric result shows that the total willingness to pay from double bound elicitation method was computed at 156,785.1 birr (1 US$=17 birr) per annum for five years, while the willingness to pay from open ended elicitation method was computed at 128,264.55 birr per year. The total annual WTP for irrigation water from double bound elicitation method was greater than from open ended elicitation method. Hence, policy makers should target double bounded elicitation method than open ended elicitation method to eliciting the willingness to pay for irrigation water. This study empirically proved that households’ income, age, cultivated land, initial bids, awareness and educational level are the key determinants of demand for irrigation water. Therefore, significant socio-economic variables should also be considered while designing irrigation water related projects at household level.

Key Words: Contingent Valuation Method; Willingness to Pay; Irrigation Water, Double Bounded Dichotomous Choice, Ethiopia