Willingness to pay for change : the use of contingent valuation and choice experiments in the Trinidad and Tobago water services sector

Abstract

Financing water infrastructure has been increasingly identified as a constraint to reaching the Millennium Development Goals for developing countries' water sectors and a significant area in which potential exists to develop sustainable financing is through the design of appropriate tariff policies.This thesis examines in detail the demand for water service improvements by analysing the willingness to pay for such improvements in Trinidad and Tobago. The basis for the work is a household sample survey conducted in 2003 which assessed the current quality of service and attitudes towards changing the status quo situation. The survey of 1419 households showed that services are poorer than officially stated, and that in response many households have opted for private coping solutions to mitigate the poor service levels of the utility.Choice experiments, which have only limited previous application in the sector, are employed to develop attribute based utility models describing the welfare effects of service level changes, in addition to the more commonly used contingent valuation method. A rigorous comparison of the two methods is developed. It provides evidence that the choice experiment methodology has benefits for policy analysis around the willingness to pay for service changes in the water sector.An analysis of proposed marginal cost based tariffs in Trinidad, as a part of wider sector reforms, is used as a case study for the policy applications of the choice experiment based willingness to pay data. Consumers are willing to pay for investments in water infrastructure, provided that they impact upon the actual service received. Marginal cost based tariffs might be socially unacceptable given that whilst significant, the willingness to pay, given likely service changes associated with planned investments by the Trinidadian water utility, for service changes is not sufficient to cover this economically efficient level of tariff