Economic evaluation of groundwater resource in the Effutu Municipality: An application of the Gisser-Sanchez effect

Abstract

This study presents an economic valuation of the groundwater resource in the Effutu Municipality. It tests the validity of the Gisser-Sanchez's position that the benefits derived from implementing a groundwater management intervention are insignificantly small compared to when no intervention is made. Hundred groundwater-user households were sampled by quota, convenience, and simple random sampling techniques. Assuming a quantitative approach, a contingent valuation-based willingness to pay questionnaire was used for data collection. Respondents were asked to value groundwater under two regimes based on quality: (1) unmanaged quality and (2) hypothetically-managed quality regimes. Using the Lancaster demand theory, the values assigned under either regime were assumed as the benefits users would derive from using groundwater. The statistical difference between the benefits of the two regimes was established by the Wilcoxon Signed Rank Test. The findings revealed that groundwater users are willing to pay 20 Pesewas (GH₵ 0.2) and 30 Pesewas (GH₵ 0.3), respectively, for a 10 L bucket of groundwater from the unmanaged quality regime and groundwater from the hypothetically-managed quality regime. The study established a statistically significant difference between the economic values of groundwater under either regime, indicating that the Gisser-Sanchez effect does not hold for groundwater used for drinking and domestic purposes in the Effutu Municipality. It has been expressed that improving groundwater quality will significantly increase the economic value of the resource. It has therefore been recommended that efforts should be made to treat groundwater to assume the quality of the Ghana Water Company's pipe-borne water after drilling projects in the Municipality.