Households Willingness to Pay for Improved Water Services: The Case of Burayu Town Administration: Application of Contingent Valuation Method

Abstract

This study is initiated by the current deep rooted problem of improved water supply prevailing in Burayu town and its primary objective is to estimate mean willingness to pay of households using contingent valuation method. A total of 239 sampled households are interviewed in person. A single bounded closed ended followed by open-ended format were used to elicit willingness to pay for improved water. Of 217 respondents 160(73.3%) accepted bid values of improved water provided to them. The data was analyzed both in descriptive and econometric models. The probit and tobit models were used for empirical analyses. In closed ended format, the households’ mean willingness to pay for one Jeri can of improved water was 31.5 cents and 42.7 cents in open ended format. Households characteristics’ such as age, income, occupation and education are positively determine the probability of accepting the given bid value of improved water. The bid value, dummy variables such as source of water, quantity and quality negatively affect the willingness to pay for improved water in probit model. Those variables affecting the likely of willingness to pay positively also have the same sign in tobit model of determining the maximum willingness to pay. The aggregate willingness to pay of households was estimated to be 1613942.62 birr per month. The current average revenue of the town’s water supply and sewerage enterprise is estimated to 515009.95 birr for one per month. The study revealed that households are willing to pay more of the current tariff blocks for improvement. Therefore if the improvement scenario comes to effect in one way it solves the shortage of improved water problems in the other way the town’s water supply and sewerage enterprise can collect more revenue from service charges.

Keywords: Willingness to pay, Contingent valuation, Use value and Non-use value.

DOI: 10.7176/JESD/11-3-01

Publication date: February 29^th 2020