Abstract
The paper uses a contingent valuation survey to estimate the non-market benefits of improvements in the water systems in a small island state. By conceptualising economic benefits through the willingness to pay (WTP) approach, two econometric models are estimated - a participation logit regression model focusing on the intent to contribute an amount of money and a double-bounded model analysing WTP and associated responses. The regression analysis concludes that income, age, education level and household size are important determinants of WTP. The mean WTP is estimated at 0.02% of average monthly household income. Households are willing to pay an equivalent increase of 27% in the mean water bill for a reliable water supply system, confirming significant aggregate benefits on an annual basis. The result of the study is an important component in cost-benefit analysis for water-related investments.
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