, Volume 49, Issue 2, pp 173-198
Date: 25 Nov 2010

The Value of Household Water Service Quality in Lahore, Pakistan

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Most existing literature focuses on the benefits of establishing basic drinking water access for unserved populations, the extensive water supply margin. In contrast, this article examines the intensive margin—the benefits of improving water service to under-served households, a growing population in developing country cities. We use contingent valuation to estimate willingness to pay (WTP) for improved piped water quality and reductions in supply interruptions among a sample of 193 households in Lahore, Pakistan. The distribution of WTP is described using parametric and non-parametric models. Results indicate that households in Lahore are willing to pay about $7.50 to $9 per month for piped water supply that is clean and drinkable directly from the tap—comparable to the monthly cost of in-home water treatment, and about three to four times the average monthly water bill for sample households using piped water. Estimates of WTP for reducing supply interruptions are both smaller and more difficult to interpret, since a significant fraction of the estimated WTP distribution for supply improvements is negative. All of our WTP estimates are well below 4% of monthly household income, the World Bank’s benchmark upper bound for affordable water service.

Akram is a doctoral student at the School of Forestry and Environmental Studies, Yale University. Olmstead is a Fellow at Resources for the Future. We are grateful to the Career Development Office at the Yale School of Forestry and Environmental Studies for financial support, to the Kashf Foundation for support and assistance with survey implementation, and to Erin Mansur, Robert Mendelsohn, and seminar participants at Resources for the Future and the International Water Resource Economics Consortium for insight and comments. Two anonymous referees provided extensive comments that improved the quality of the manuscript. All remaining errors are our own.