Economic Valuation of Safe Water from New Boreholes in Rural Zambia: A Coping Cost Approach with Estimates of Internal Rate of Return
Access to safe water sources remains scarce in sub-Saharan African countries. We estimate the economic value of safe water from newly constructed boreholes in rural Zambia. Our quasi-experimental setting allows us to estimate the revealed preference measure of new safe water sources in a causal way, empowered by precise information on water collection and distance to new facilities. We show that the share of time value for water collection in total expenditures was about 5 percent at the baseline survey, which was reduced to 1.6 percent at the end-line survey, but the difference-in-differences analysis reveals that the project did not reduce the time burden for collecting water due to the greater demand for safe water. Moreover, we estimate the economic benefits of the project stemming from the significant reduction of diarrhea incidence. By estimating the economic value of a reduction in days lost due to diarrhea and a decrease in age-standardized disability-adjusted life years (DALYs), the internal rate of return (IRR) is estimated to be 14.2 percent, which is highly likely to be the lowest boundary of the actual IRR.