DT 20/20 - Disposición a pagar por calidad de agua: estimaciones a través de gastos defensivos.

The provision of drinking water is essential for the health of human beings. In spite of a wide distribution network and of official information about the drinkability and quality of the pipe water provided to households in Montevideo, most of them have chosen to avoid or at least partially substitute its consumption by boiling it, installing filters or by buying bottled water. These choices can be seen as defensive consumption, and provide an opportunity to infer the value that households assign to water quality, through the use non-market valuation techniques. This work identifies factors affecting the decision of using defensive methods in Montevideo together with the magnitude of such expenses. Using data from a survey (conducted as part of this study), we estimate a selection model in which the first stage identifies factors affecting the probability of employing defensive methods, whereas the second stage identifies the determinants of the expected magnitudes of these expenses. Our findings indicate that socioeconomic variables, perceived-quality and health factors affect both the likelihood of employing defensive methods and the expected magnitude of these expenditures. We find that on average, the monthly per capita expenditure is about $7 dollars, while it is $18 dollars for the average household. This indicates that on aggregate, the population of Montevideo spends about 111 million dollars per year to cope with a perceived deterioration of the water quality received at their homes. The information generated in this study is a key element for cost-benefit analysis in order to formulate public policies to improve the water provision services (and/or the perceived water quality) in the city and to reduce contamination in the watercourses from point or diffuse sources.