Scope sensitivity in households' willingness to pay for maintained and improved water supplies in a developing world urban area: Investigating the influence of baseline supply quality and income distribution upon stated preferences in Mexico City

Abstract

[1] We present the first assessment of willingness to pay (WTP) for water supply change to be conducted in the largest city in the developing world: Mexico City. Two large sample contingent valuation surveys are conducted to investigate WTP for two levels of water service quality: maintenance of or improvement over current provision levels. This study design permits one of the first tests of the ''scope sensitivity'' of WTP responses to different levels of baseline supply provision. This testing is complicated within the present case because as our study confirms, higher-income households typically enjoy better levels of current provision, while poorer households generally endure lower current standards of water supply. We incorporate this heterogeneity of service and correlation with income within a suite of novel scope sensitivity tests. These confirm prior expectations that richer households enjoying higher baseline service levels would prefer programs to maintain the status quo, while poorer households enduring lower initial quality of service would prefer schemes which improve the quality of supplies. The implications of these findings are further investigated by contrasting conventional benefit-cost analysis aggregation procedures with an equity weighting approach which confirms the difference in priorities according to initial supply conditions. In this case, the ranking of programs changes when the ability to pay is equalized across society. In fiscal terms, aggregate WTP figures show that authorities could collect the resources necessary to fund households' preferred schemes and simultaneously substantially reduce current subsidies.Citation: Soto Montes de Oca, G., and I. J. Bateman (2006), Scope sensitivity in households' willingness to pay for maintained and improved water supplies in a developing world urban area: Investigating the influence of baseline supply quality and income distribution upon stated preferences in Mexico City, Water Resour. Res., 42, W07421,

Willingness to pay for safe drinking water: Evidence from Parral, Mexico

“…Specifically, many urban areas in developing countries face acute imbalance between demand and supply for safe reliable water, as demand (at current pricing) and requisite infrastructure often surpasses existing capacity (Soto Montes de Oca and Bateman, 2006). System revenues and available program subsidies are often not enough to adequately maintain water infrastructure and treat water for drinking purposes.…”

“…Previous CV applications have elicited WTP for changes in residential water quality or services in a variety of developing country contexts. However, a majority of CV applications have focused on rural communities in developing countries, and mainly in Asia and Africa (Soto Montes de Oca and Bateman, 2006).…”

Inequality in Access to Drinking Water and Subsidies between Low and High Income Households in Mexico City

“…Numerous urban areas in developing countries face an imbalance between household water demand and a supply that is reliable and safe for consumption [2]. At the same time, economic income for the provision of the service and the subsidies of the available programs are, in many cases, not sufficient to adequately maintain water infrastructure and to ensure the quality and quantity of drinking water [3].…”

Household’s Perception of Water Quality and Willingness to Pay for Clean Water in Mexico City

“…In developing countries, many urban areas face the unevenness between supply and demand of reliable supply of good quality drinking water (Soto Montes de Oca and Bateman 2006). Moreover, the income and subsidies given to water facilities often are not sufficient to adequately maintain the necessary infrastructure and to ensure the quality of the water supply (Gadgil 1998).…”