A WTP measure was determined by estimating separately, and then summing, the values obtained from two revealed preference methods: averting behaviour and damage costs. The three monthly averting expenditure estimates, considering joint production of bottled water, amounted to US$ 0.67, 0.74 and 0.79 per household,
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respectively. The labourer estimate represents poor landless households headed by individuals that labour for land-owning farmers. The mid-level market estimate represents slightly higher-income households that prefer to buy firewood (instead of collecting it) or might need to purchase it due to being located in communities far from accessible forest areas. The high national estimate is representative of land-owning farmers that work their own land or hire labourers to do so. The range of estimates for the study site are at the lower end of the ranges reported in the literature, between US$0.05 - 204 (McConnell and Rosado, 2000; Wu and Huang, 2001; Um et al., 2002; Roy et al., 2004; Pattanayak et al., 2005). This is likely due to these studies focusing on large urban populations unlike the small rural communities examined in this study.
The researcher agrees with Jalan and Somanathan, 2008) finding that averting expenditure probably provides only partial protection from contaminated water, as evidenced at the study site by the presence of waterborne illness, so it represents an incomplete measure of WTP. Some authors consider that the true benefits associated with the improvement in water quality actually equal the change in averting expenditure plus damage costs plus net direct disutility of illness, i.e. monetary value of lost leisure time, pain and suffering (Harrington et al., 1991; Pattanayak et al., 2005; Jalan and Somanathan, 2008). The damage costs of illness were estimated, but this study did not cover the disutility of illness due to resource limitations and it being considered negligible (see section 5.2.3).
The trimmed monthly damage cost due to illness comes to US$ 0.49 considering all symptoms. It is recognised that the three symptoms included in the damage cost estimate could be due to other causes such as food poisoning. However, national health statistics and recent studies in Honduras report much higher diarrhoea frequencies than those reported here. For instance, Solorzano Giron et al., 2006)
4
All study figures were converted from US dollars of the publication year to 2011 US dollars, to compare to this study’s results, using the CPI Inflation Calculator of the Bureau of Labor Statistics of the United States Department of Labor
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found that more than 25% of children under five years old have at least one hospital consultation for diarrhoea annually in the area of this study. Halder et al., 2013) found that 30 - 72% of three small rural communities reported diarrhoea in the previous 30 days to the study. The potential reasons for the large discrepancy between these studies and the results presented here are manifold, so no strong assumptions can be made. However, recall bias, not being able to recall expenditures over a long time period (Chu et al., 1992), is likely to play a role in the results presented here. These studies indicate that the damage costs reported in this study are likely to be conservative estimates.This statement is further backed by the damage costs being at the lower end of the values reported in the literature. For instance, Dasgupta, 2004) found the illness damage cost in Delhi, India to be between US$ 0 - 10.38; and Guh et al., 2008) estimated the cost of treating Shigellosis in Hebei, China at US$ 7.70.
The revealed WTP obtained by summing the average averting expenditure and the trimmed damage costs amounts to US$ 1.22 per month per household. This estimate also amounts to a negligible 0.5% of the average household income at the study site. This means that current measures to ensure drinking water is clean and to treat waterborne illness are overall economically accessible to households as long as they are willing to implement them. However, if this revealed WTP is considered equal to a WTP for a potential PES scheme, then it is necessary to assess the share of income the WTP would represent for the poorest households. If the water bill were increased by the revealed WTP, it would affect households in the two lowest income quintiles. For instance, a household paying the lowest water bill and in the lowest income quintile, would be spending 3% of their income towards water. Considering an affordability threshold of 2.5% of income as a reasonable upper limit for water bills (OECD, 2003), it is estimated that a total of 20% of households5 will not be able to cope with a water bill increase. However, this high expenditure to ensure clean water is already being paid by those households who carry out averting actions. This evidences a clear ability to pay for improved
5
Based on the proportion of households per quintile per water bill in the sample and extrapolated to the entire study site.
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drinking water quality above current fees for the three highest income quintiles, so increases could be made to their water bills but not so for the households in the two lowest income quintiles.
The revealed WTP estimate is also 1.5 times higher than the mean water bill. If jointness is accounted for correctly at the study site, this high WTP estimate indicates that substantial increases can be made to water bills if water quality can be ensured.The relationship between WTP and water bill, and income value, serve as measures of affordability for clean drinking water. A revealed WTP is often a preferable justification for water conservation policy interventions, than for instance a stated WTP, as it represents actual costs incurred by users. This study highlights how household income and water bills can serve as measures of affordability for clean drinking water, to identify actual WTP expenditure and to inform affordable water bill increments. Thus, the revealed WTP for clean drinking water comes to US$ 22,619 for the entire study site. This figure represents the amount that could be raised from water users if clean drinking water can be guaranteed with a PES scheme or other policy intervention.
The value of illness disutility, through lost leisure time, and pain and suffering, has been mentioned as a key factor to be considered in illness damage costs estimations. However, in this study disutility of illness is considered negligible, as evidenced by the few lost days of work due to illness (e.g. Guh et al., 2008). It is also clear that the revealed WTP estimate is likely to increase if more information on water contamination and household water treatment methods is provided to water users (see Jalan and Somanathan, 2008). Similarly, context specific information on the joint production of bottled water at the study site might alter the averting expenditure estimate. All considered, the values presented in this study are considered sound estimates, providing a valid measure of WTP.
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