This paper reports a contingent valuation study on households’ willingness to pay (WTP) for improved municipal solid waste management (SWM) services in four small towns located in Eryuan county, Yunnan Province, China. This study is based on an actual investment project proposal, which seeks financial support from the World Bank. A multiple bounded discrete choice (MBDC) contingent valuation survey was developed and implemented in July 2007, to systematically collect households’ preference information over the possible SWM services and the associated costs. It is expected that the potential hypothetical bias and uncertainty bias associated with the contingent valuation approach have been kept to the minimum.

This study finds that on average a household in Eryuan is willing to pay about 17 yuan per month for its solid waste collection and disposal, with a median value of 13 yuan. This WTP can barely cover the project cost, if the payments can be properly collected. Assuming the estimated WTP of the households in Eryuan to be the total value of the project benefits, the economic internal rate of return (EIRR) of the project is found to be about 5%, which is low but can still justify for project implementation, especially when considering the fact that the WTP value provided in this study is a conservative estimation<sup>20</sup> .

The mean WTP estimated in this study is about 1% of the household income. This result is within the range found in other developing countries, which is higher than the estimations obtained in Pakistan (0.2-0.3%), Malaysia (0.6-0.9%), Lithuania (0.1%), and Bangladesh (0.1%), but lower than the estimations obtained in Tonga (1.6-3.1%) and Nigeria (1.7%). However, the poorest households in Eryuan, which have an annual income lower than 4000 yuan and account for about 25% of the total population, are willing to pay more than 5% of their income for their solid waste disposal. This implies that the poor households in Eryuan have very strong demands for public solid waste management services.

Further analyses of the survey data show that the poor households may have stronger demand for the proposed improved SWM service than rich ones, not only in a relative sense to their incomes but also in absolute WTP values. In the areas of new coverage where no public SWM services are available, the marginal WTP of the poor households is significantly higher than that of the middle income and rich households, according to the econometric analyses, and the average WTP of the poor households is also higher, even though the differences may not be statistically significant. One reason could be that the poor households in those areas were suffering seriously from the solid waste problem, while the rich ones had private coping measures.

A consistent phenomenon is also found about the rich households in Eryuan. If there have been regular solid waste cleaning services in their neighborhood, they are in general willing to pay more for the proposed SWM project. If the solid waste problems around their houses are thought to be serious, they are willing to pay less for the proposed project. This may be understood as if the rich households have already taken some private preventive measures on the solid waste problems around their houses when the problems are thought to be serious, and therefore the potential benefits that they can enjoy from the proposed improved SWM project are reduced.

Among household and individual characteristics, income is found to be a dominant determinant of WTP for SWM services, with an elasticity of 0.22. As expected, those who

> 20 The WTP estimated in this study is only the total value of perceived benefits of those households located in the project area. Methodologically, the MBDC design, which starts the bid from the lower end of the payment card, also produces a conservative estimation of WTP.

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