Economic value of domestic water supply in Republic of Korea

Abstract

The purpose of this study is to examine the economic valuation methods of domestic water for each region of Republic of Korea and to examine the factors affecting Willingness to Pay, hereafter WTP, of domestic water. KDI guidelines (2008) stipulate that the benefit of domestic water supply and that of industrial water supply should be calculated separately during the pre-feasibility study. For industrial water, the reference value specified in the KDI guidelines (2012) may be applied as WTP, but in the case of domestic water, Contingent Valuation Method, hereafter CVM, should be implemented every time. The Ministry of Land, Transport and Maritime Affairs (MLTMA, 2012) proposed WTP of domestic water for each region using the results of CVM. I investigate the effect of limited or stopped water supply experience on WTP by using MLTMA (2012) survey results. Multiple regression analysis shows that limited or stopped water supply experience had a positive effect on WTP. But since it is confirmed that there are other variables such as preschool children that have a greater effect on the WTP, it is not meaningful to collectively increase the WTP in a drought area. Therefore, in this study, the economic value of the domestic water for each region is suggested by applying the consumer price index to the result of MLTMA (2012). If the economic value of domestic water through this research could be included in the KDI guideline like industrial water, and the economic value of domestic water supply can be calculated without conducting CVM, this research will contribute to saving time and money.