Estimating Willingness-to-Pay for Water Quality in the US

In this paper, we evaluate potential benefits of drinking water infrastructure investments in the United States. We first estimate willingness-to-pay for high-quality drinking water using consumer avoidance behavior in response to health-based drinking water quality violations. We find a modest but statistically significant increase in bottled water purchases in the year in which a county has at least one active violation. We then estimate a household-level discrete choice model of drinking water. We find that the average household is willing to pay $162 per year to avoid a one standard deviation decrease in water quality. We additionally find that WTP for bottled water increases in income. We use these estimates to evaluate several counterfactual scenarios. In a scenario in which the United States’ water infrastructure deteriorates to the levels of Flint, MI in 2014, we find that US households would be willing to spend, in aggregate, $160 billion per year to access safe drinking water. This total is 41% higher than annual US public spending on water infrastructure, suggesting that consumer preferences strongly justify major increases in water infrastructure investments in the United States