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Water and sanitation service delivery, pricing, and the poor: An empirical estimate of subsidy incidence in Nairobi, Kenya

Journal article
Authors D. Fuente
Josephine Gakii Gatua
M. Ikiara
J. Kabubo-Mariara
M. Mwaura
D. Whittington
Published in Water Resources Research
Volume 52
Issue 6
Pages 4845-4862
ISSN 0043-1397
Publication year 2016
Published at Graduate School (School of Business Economics and Law)
Pages 4845-4862
Language en
Keywords water tariff, water pricing, increasing block tariff, subsidy targeting, water utilities, Nairobi, Kenya, targeting performance, policies, countries, tariffs, Environmental Sciences & Ecology, Marine & Freshwater Biology, Water, Resources
Subject categories Economics and Business


The increasing block tariff (IBT) is among the most widely used tariffs by water utilities, particularly in developing countries. This is due in part to the perception that the IBT can effectively target subsidies to low-income households. Combining data on households' socioeconomic status and metered water use, this paper examines the distributional incidence of subsidies delivered through the IBT in Nairobi, Kenya. Contrary to conventional wisdom, we find that high-income residential and nonresidential customers receive a disproportionate share of subsidies and that subsidy targeting is poor even among households with a private metered connection. We also find that stated expenditure on water, a commonly used means of estimating water use, is a poor proxy for metered use and that previous studies on subsidy incidence underestimate the magnitude of the subsidy delivered through water tariffs. These findings have implications for both the design and evaluation of water tariffs in developing countries.

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