Demand for Piped and Non-piped Water Supply Services: Evidence from Southwest Sri Lanka

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 p...

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Bibliographic Details
Published in:Environmental & resource economics 2009-04, Vol.42 (4), p.535-549
Main Authors: Nauges, Céline, van den Berg, Caroline
Format: Article
Language:English
Subjects:
Agriculture and Environment Q150
Demand
Demand estimation
Economic Development: Agriculture
Economic Development: Regional, Urban, and Rural Analyses
Economic Policy
Economics
Economics and Finance
Elasticity of demand
Energy
Environment
Environmental Economics
Environmental Law/Policy/Ecojustice
Environmental Management
Gas Utilities
Household water use
Households
Humanities and Social Sciences
Irrigation
Land Ownership and Tenure
Land Reform
Land Use
Natural Resources
Other Primary Products O130
Piped and non-piped water services
Pipelines
Price elasticity
Price policy
Pricing policies
Pricing policy
Renewable Resources and Conservation: Water Q250
Sanitation
Sri Lanka
Studies
Transportation O180
Water demand
Water supply
Water utilities
Water Utilities L950
Water utilization
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Summary: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.
ISSN:0924-6460
1573-1502
DOI:10.1007/s10640-008-9222-z