The design and evaluation of water tariffs: A systematic review

Across the globe, many low- and middle-income countries are investing in their first generation of piped water and sanitation infrastructure. At the same time, the water and sanitation infrastructure in many industrialized countries is reaching, or has reached, the end of its useful life. Governments will need to mobilize substantial resources to finance this global water and sanitation infrastructure transition and user charges (tariffs) will play an integral role in supporting these efforts. This paper presents the results of a systematic review of the empirical literature on the design and evaluation of tariffs for municipal water and sanitation services, highlighting ways in which insights from the literature might inform policy and identifying areas for future research. Overall, we find that the empirical literature on pricing municipal water and sanitation services is diverse. Studies identified through our systematic review are published in a wide range of journals and vary considerably with respect to their primary aims, methods, number of tariffs analyzed, and the metrics used to evaluate different tariffs. The majority of studies examine two or fewer metrics of tariff performance, limiting the extent to which the literature characterizes the tradeoffs policy makers face when setting tariffs for municipal water and sanitation services. Finally, the majority of studies in the literature focus on water pricing in industrialized countries, highlighting an opportunity for research on water pricing in low- and middle-income countries.