Lack of access to potable water in rural areas remains one of the greatest global development challenges. Climate change, urbanization, and economic growth place increasing stress on water resources, exacerbating the situation. With limited resources, policy-makers must prioritize their options towards development, including not only the provision of potable water, but healthcare, education, nutritional needs, and economic growth.
To accurately analyze the costs and benefits of competing policy options, their relative value to the individuals impacted by them must be understood. Determining this value is challenging, however, as many environmental goods, including potable water, are not priced on an open market—such a market may not exist, or it may fail to reflect the actual value.
Economists have developed a variety of methods to try to estimate the value that impacted populations place on the environmental good in question. These methods are referred to collectively as non-market valuation. Although non-market valuation can take a number of different forms, one of the most popular techniques is the contingent valuation method. Contingent valuation involves directly surveying individuals, determining respondents’ willingness to pay for the provisioning of a particular quantity of an environmental good. This can take the form of asking directly how much they would maximally be willing to pay for a specified quantity of an environmental good, or whether they would be willing (and able) to pay a specified amount for that good.
With this in mind, Brian Witt from Technische Universität Wien, has examined thirty three high-quality contingent valuation studies of rural potable water systems, showing that rural water consumers are willing to pay, often substantially, for the creation of potable water systems or for improvements to existing systems. Studies involving changes to existing potable water system, through improvements providing greater reliability or sustainability, showed a high degree of consistency in respondents’ willingness to pay estimates. Higher incomes, and higher levels of education and youth, among other characteristics, were found to be positively correlated with estimates on greater willingness to pay.
By introducing non-specialists to the contingent valuation process, an in-depth review of existing contingent valuation studies is provided. The impact of the specific choices of methodology and context, as well as demographic variables, on willingness to pay estimates are analyzed, which provides possible fruitful avenues of future research.
Kindly contributed by the authors.
