Another way of exploring the relative value that households place on different services is to consider how much extra they are willing to pay to rent a dwelling thatother things being equalhas access to utilities. This rental premium can be estimated using a hedonic function that models rental payments (or estimated rental payments in the case of owner-occupied housing) as a function of the availability of utilities and of a wide range of variables that affect the price of housing (geographical location, quality of construction, size and age of dwelling, facilities). For full details of the model see Table A5 of the Data Annex. The results show that utility services attract statistically significant rental premia, which represent a substantial percentage of the rent. Although the results vary by geographical zone, telephone services typically attract the highest rental premium, followed by electricity and water.

**<u>Table 3.5: Rental value of access to modern utility services</u>**

||Metropolitan<br>(urban and rural)|Urban<br>(non-Metropolitan)|Rural<br>(non-Metropolitan)|
|---|---|---|---|
|Predicted rent in Quetzales|794|379|159|
|Value as a % of rent<br>Water|48%<sup>***</sup>|0.3%<br>|-1%<br>|
|Drainage<br>Electricity|2%<br>9%<br>|9%<sup>*</sup><br>31%<sup>***</sup><br>|17%<sup>**</sup><br>18%<sup>***</sup><br>|
|Telephone|56%<sup>***</sup>|22%<sup>***</sup>|32%<sup>***</sup>|
|Value in Quetzales||||
|Water|379<sup>***</sup>|1<br>|-2<br>|
|Drainage|16|32<sup>*</sup><br>|27<sup>**</sup><br>|
|Electricity|72<br>|118<sup>***</sup><br>|29<sup>***</sup><br>|
|Telephone|447<sup>***</sup>|82<sup>***</sup>|51<sup>***</sup>|

_Notes_ : Values calculated from the regional-specific hedonic price function estimations.

Significance level of corresponding variables in the hedonic model:<sup>***</sup> 99% level.<sup>**</sup> 95% level,<sup>*</sup> 90% level. Metropolitan includes urban and rural in this region, while urban and rural exclude the Metropolitan region. _Source:_ World Bank calculations using the ENCOVI 2000, Instituto Nacional de Estadística – Guatemala

# **3.2       International context**

To put these findings in an international context, comparable figures are presented for three neighboring Central American countries: El Salvador, Nicaragua and Panama (Table 3.6). Coverage levels in Guatemala lie towards the middle of the range for this peer group; in general, they are somewhat better than those in Nicaragua and El Salvador, but not as good as those in Panama. Finally, the pattern of access to modern utilities across consumption quintiles in Guatemala is very similar to that found in neighboring Central American countries (Figure 3.1). This illustrates that the degree of inequity in access to basic services found in Guatemala is typical of the Central American region.

**Table 3.6: Central American comparisons of urban and rural coverage**

||||||(Perc<br>|entage o<br>|f househ<br>|olds)<br>|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
||<br>Nat’l|Electricity<br>Urban|<br>Rural|Pi<br>Nat’l|ped wate<br>Urban|r<sup>♦</sup><br>Rural|Bas<br>Nat’l|ic sanitati<br>Urban|on<sup>♣</sup><br>Rural|<br>Nat’l|Telephone<br>Urban|<br>Rural|
|Guatemala|70|92|54|69|88|54|87|97|79|20|40|5|
|El Salvador|80|95|55|52|69|25|81|85|74|20|32|1|
|Nicaragua|69|91|40|61|95|74|84|95|70|16|16|1|
|Panamá|79|98|52|86|95|74|93|99|86|41|62|11|

_Notes_ :<sup>♦</sup> Piped water in dwelling or yard.<sup>♣</sup> Includes toilets and latrines. El Salvador and Honduras quintiles based on income aggregate. _Sources_ : El Salvador (Encuesta de Hogares de Propósitos Múltiples 1997); Guatemala (ENCOVI 2000, Instituto Nacional de Estadística - Guatemala); Honduras (Encuesta Nacional de Ingresos y Gastos de los Hogares, 1999); Nicaragua (LSMS 1998-99); Panama (LSMS 1997).

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