Analyses Of Affordability And Determinants Of Willingness To Pay For Improved Water Service In Urban Areas Strategy For Cost Recovery. (a Case Study Of Nazareth Town Ethiopia)

The provision of improved water supply service both in urban and rural areas of the countryrnis essential. Millions of people are facing problems of obtaining adequate potable waterrnsupply. When we see the coverage of improved water supply in both urban and rural areas ofrnthe country it is very low, though it is relatively better in urban areas. This shows much isrnremaining to attain full coverage for the people of Ethiopia. Parallel to increasing therncoverage we need to consider the proper use of the resources and sustainability of the servicernThe policy for increasing the coverage as well as the proper use and sustainability of thernservice requires implementation of a cost recovery system, which can be either full or partialrncost recovery. In order to implement cost recovery system we need to examine thernaffordability and willingness to pay of the beneficiaries.rnTherefore, the objective of this paper is to examine the determinants of the willingness to payrnof water consumers and to find out whether it is possible to introduce full cost recoveryrnprogram to provide improved water supply in urban areas of the country.rnWe used a contingent valuation method to examine the determinants of willingness to pay.rnThe value elicitation method used in our study is bidding game. The total number ofrnhouseholds surveyed is 307, and an in-person interview was used to administer the survey.rnUnlike most studies, we used a censored LAD estimation for the empirical analyses, whichrndoes not need the normality and homoskedacity assumption of the distribution of the errorrnterm. We also used the probit model to see the effect of the explanatory variables on thernchoice of the household to the improved water service. The CLAD estimation result showedrngender, income, monthly expenditure for water consumption, quality and time taken to fetchrnwater from existing source significantly affects the respondent’s willingness to pay. While thernprobit estimate result showed that wealth, income, education level, source the household isrnbeing used, quality and time taken to fetch water from the existing source affect the choice ofrnthe respondents to the improved water service.rnThe descriptive analyses result revealed that the mean WTP for improved water service isrnhigher than the existing tariff. And the affordability analyses result also indicated thatrnconsumers are able to pay if they are provided the improved water service at a price equal tornthe average incremental cost of providing the improved water supply service

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