Is willingness to pay for freshwater quality improvement in Pakistan affected by payment vehicle? Donations, mandatory government payments, or donations to NGO’s

Abstract

This study examines the effect of payment vehicle and managing agency on household’s stated willingness to pay (WTP) for freshwater quality improvement in Pakistan’s Swat River valley. Contingent valuation questions scenarios were designed based on three different payment mechanisms; a mandatory payment to government, a donation to government and a donation to a local non-government organization (NGO). Results show that zero WTP response rate is lower significantly for donation to a local NGO compared to mandatory and voluntary payments to government. Household’s annual donation to a local NGO is $2.8, which is almost double to mandatory and voluntary payments to government. Interviews indicate that this difference might be due to households’ lack of trust of the government programs or fear of corruption, or might be a strategic response to overstate actual WTP when asked about donations to an NGO. The implications for contingent valuation researchers looking to value WTP in poverty dominated areas are that a donation to a local NGO can be used as one payment vehicle to obtain an upper bound on WTP and a mandatory payment to the government can be used as a lower bound.