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Household’s Valuation of Domestic Water in Indonesia: Revisiting the Supply Driven Approach

Yusuf, Arief Anshory and Koundouri, Phoebe (2004): Household’s Valuation of Domestic Water in Indonesia: Revisiting the Supply Driven Approach. Published in: Econometrics Informing Natural Resources Management Selected Empirical Analyses (2004)

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Abstract

We apply the hedonic analysis on a nation-wide microeconomic dataset of Indonesia. Our results indicate that in urban areas, people value having improved domestic water sources (piped and pump water), while this is not true for households in rural areas. Moreover, households in both urban and rural areas do not seem to value communal water sources, probably reflecting the effects of the free-rider problem, when services have characteristics of public goods. On the whole, our results show that households in rural Indonesia are not willing to pay for improved domestic water sources, which pinpoints a major challenge to the DDA approach. Assuming universal rights for provision of safe and improved water quantities that cover basic needs, subsidization of water provision is still called for.

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