Willingness to pay for improved water service quality and reliability is designed to account for all the costs mentioned above. However, as with electricity, estimates are rare and very heterogenous (Appendix – Table 8). To our knowledge, most assessments of the willingness to pay for improvement in the water distribution service are applied in developed countries. After a choice experiment, Hensher et al. (2005) find that in Canberra, the willingness to pay to reduce the frequency and duration of water disruptions depends on the current state of water services reliability. The respondents were willing to pay 113.32 Australian dollars (USD 102) per year to avoid one outage if they have to face one outage every ten years, but only 9.48 Australian dollars (USD 8.87) per year when they experience monthly outages. There are two reasons for this difference. First, if customers face more interruptions, they are more likely to take actions to reduce their impact, such as storing water. Second, from a psychological perspective, a reduction from 12 to 11 outages seems less important than a reduction from 2 to 1. Another interesting point is that surveyed people are generally willing to pay much more to avoid an outage than the corresponding price of water (Appendix – Table 6 and Table 8).

The willingness to pay to reduce the duration of the outage also decreases with the baseline duration. Respondents value a reduction of the duration of the water outage by one hour at 54.75 Australian dollars (USD 49.5) in the case of a one-hour disruption but only 12.17 Australian dollars (USD 11.81) in the event of an 8-hour shortage. Similar results were found in the US (Thacher, 2011). A second study in Australia finds that people are willing to pay 1.45 Australian dollars (USD 1.52) per hour of outage and 7.95 Australian dollars (USD 8.38) per outage (MacDonald, Morrison, & Barnes, 2010). Here, the relation between outages and willingness to pay is linear: there is no evidence of the increasing cost as the water distribution network improves. In China, the question was framed in terms of volume of water unserved. The resulting cost for households is much lower than MacDonald Morrison, & Barnes (2010)’s findings in Australia: USD 0.03 for 1000 liters unserved (Wang, Ge, & Gao, 2018). Parameters such as demographic and economic factors could be at the origin of such a low price. Details about cost estimates are summarized in Table 8.

It is difficult to separate water supply reliability and water quality. In Mexico, Vásquez et al. (2009) find that the median sampled household would pay 229.75 Mexican pesos (USD 20.83) more in their monthly water bill for a reliable system providing safe drinking water 24 hours per day and every day of the year, which is 7.55% of the reported median income. Similarly, the evidence of high maximum willingness to pay for access to better water and sanitation systems in El Salvador suggests that there is room for profitable private investments (Perez-Pineda & Quintanilla-Armijo, 2013). However, in Tanzania and Bangladesh, even though the population is conscious about the importance of having access to safe water, their willingness to pay stays below the retail price for the tested improvements (Burt et al., 2017; Khan, Brouwer, & Yang, 2014). As mentioned earlier, this is also associated with the issues of consumers not being willing to pay for a service. The direct implication for policy making is that scaling-up improvement in water service systems might require subsidies, which might be difficult in countries where the Non Revenue Water – the volume of water the facilities do not get paid for, usually made of leaks, illegal connections and marginal use (e.g. firefighting) – represents a large share of the facilities’ revenues.

Using existing WTP estimates, and data on water outages in 123 countries from the World Bank’s Enterprise Survey<sup>10</sup> , water interruptions are estimated to cost between 0.11-0.19% of GDP, ppp each year, what corresponds to USD 88 and 153 billion globally. The method of estimation comprises some limitations that increase uncertainty. First, the WTP used to assess the global cost are issued in two

> 10 Data available here: http://www.enterprisesurveys.org/

16