The Economic Value of Water Quality

Abstract

The authors of this in-depth study describe the theory and techniques that can be applied to the specific case of valuing potable drinking water provided by ground water supplies. The theory and techniques can be extended to valuing potable drinking water provided by surface water supplies, and also to valuing alternative levels of water quality. The theory and case studies discussed in the book suggest that important determinants of the economic value of water quality include the probability of contamination measured objectively and subjectively, information on actual levels of contamination in household water supplies, socioeconomic characteristics of households and the extent to which the values of water quality people hold include non-use components. The case study results also suggest that empirical valuation results are sensitive to study design effects such as the particular statistical technique used to estimate mean or median values. These results suggest that estimating water quality values using benefits transfer techniques is problematic, but perhaps feasible with improved data and valuation models.

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