Demand for Piped and Non-piped Water Supply Services: Evidence from Southwest Sri Lanka |
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Authors: | Céline Nauges Caroline van den Berg |
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Institution: | (1) Toulouse School of Economics, LERNA-INRA, Manufacture des Tabacs, 21 Allée de Brienne, 31000 Toulouse, France;(2) Energy, Transport and Water Department, The World Bank, 1818 H Street NW, Washington, DC 20433, USA |
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Abstract: | 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. |
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Keywords: | Demand estimation Household water use Piped and non-piped water services Price elasticity Pricing policy Sri Lanka |
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