Edited by Ariel Dinar and Kurt Schwabe
Chapter 24: Water and sanitation economics: reflections on application to developing economies
The careful application of economics to potable water supply and sanitation investments is difficult, and it is thus not surprising that cost–benefit analysis is relatively uncommon in the WASH (i.e. water, sanitation and hygiene) sector. In this chapter, we offer reflections on the challenges of conducting economic analyses of water and sanitation investments. While economists have struggled with many of the issues discussed in this chapter for several decades, we are not aware of a single, brief account of the main challenges involved in the economic analysis of WASH investments. This chapter seeks to fill that gap, but it is not a step-by-step guide for economic analyses of WASH investments. Instead, we hope that discussion of several key issues will help practitioners better conceptualize the challenges associated with their work. The first section of the chapter offers a typology of different types of benefits that may result from WASH investments that emerges from a utility maximization framework. A thorough cost–benefit analysis will need to account for them when they prove to be important in a specific time and location. In the second section of the chapter we briefly review the different methods to estimate benefits from WASH investments, including both revealed and stated preference techniques. The third section is the main part of the chapter.
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