Estimating the willingness to Pay for Improved Water Service in Tanzania

Abstract

Willingness to pay is a stated preference concept in the theory of consumer behaviour that aims to determine the amount of money a consumer will pay for the supply of a good or service in the absence of a market mechanism.  It is a concept applied to many research studies worldwide, and in developing countries in particular, revealing very high levels of willingness to pay for water.  This article analyses the willingness to pay for improved water service for domestic and irrigation use in the rural setting.  We use household data from a survey conducted in the Rufiji water basin.  We used both qualitative and quantitative analysis.  The results from the non-parametric estimates suggests that, on the average, households in the low bound category are willing to pay approximately Tshs. 17,000 per annum for water environmental services, which is about Tshs. 1417 per month (approximately US$. 12).  This is approximately half of what they are currently paying.  On the other hand, the upper bound category would pay about Tshs. 47,500 per annum, which is approximately Tshs. 3,958 (3.14 US$) per month.  This is slightly higher by 32% than what they are currently paying for domestic water use; Econometric analysis suggests that income of the household, age, education, and conservation activities within villages explains households’ willingness to pay for water improvement.