Utilities as Creditors: The Effect of Enforcement of Water Bill Payment in Zambia
Presented by:
Elizabeth Spink
Harvard University
Thursday, January 27, 2022
12:00 pm-1:30 pm
Taylor-Hibbard Seminar Room (Rm103)
Online - https://go.wisc.edu/jmydkq
Policy goals of increasing household access to piped water and cost recovery for utility providers are often at odds. Nonpayment of utility bills is a common constraint to improving the quality of utility service, yet nonpayment is widely tolerated, and households often accumulate significant debt to the utility provider. I study the effect of increases in enforcement of water bill payment through supply disconnections in Livingstone, Zambia. I develop a dynamic model of household monthly payments and accumulation of arrears, which determines the household's probability of disconnection. I show that higher levels of enforcement increase the optimal payments for connected households but reduce a household's willingness to reconnect to the water utility when disconnected. I empirically test this model using an event-study framework of exogenous increases in enforcement capacity that occur during administrative rezoning events, which reduce the number of households that one enforcement agent is responsible for. I find that low-income households are 20 percent more likely to be disconnected from their water supply after rezoning events, while high-income households experience no change in disconnections. Households are more likely to make a payment following rezoning events, but revenue increases are small and short-run. The results suggest that high enforcement of water bill payment toward credit-constrained households may be ineffective and leads to reduced piped-water access.
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