The Economic Value of Basin Protection to Improve the Quality and Reliability of Potable Water Supply: Some Evidence from Ecuador

water supplied is low, 70 percent perceive the water quality as deficient, and 38% view the water
supply as unreliable. Even though water is available 7 days a week to all surveyed respondents,
19 percent of the respondents indicated that their access to water is less than 6 hours a day.
Respondents believe that poor water quality and intermittent access to water primarily result
from poor administrative management and poor system maintenance.

The survey respondents recognize the importance of preserving the basins that serve
Loja. In fact, 93 percent of the individuals surveyed believe reforestation of the micro-basins
could improve or at least maintain the quantity of water that the two basins now provide.
Moreover, 84 percent believe that the best solution to the problems caused by the presence of
private owners residing within the watershed is to purchase of their land. Additional compiled
survey information is found in Benavides and Arias (2005).

Willingness to Pay Results

The direct responses to the WTP question reveal that average monthly WTP by Loja households
is $5.80 to finance a basin protection plan to improve the city’s water supply service. In contrast,
the estimated median WTP by Loja residents is only $3 per month. The average and median
WTP values represent approximately 0.74 and 0.38 percent of monthly income, respectively.
These percentage values are consistent with the lower bound estimates of other studies that have
estimated household WTP for improvements in drinking water quality which range from 0.25
percent to 3.24 percent of monthly income (Casey et al., 2005; Eisen-Hecht and Kramer, 2002;
Johnson and Baltodano, 2004; and Whittington et al., 1990).

Household’s mean and median WTP of $5.80 and $3.00 to improve water supply security
corresponds to an increase of 29.5% and 15% in the average household water bill, respectively.

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