Publication: Incentive-Based Subsidies : Designing Output-Based Subsidies for Water Consumption
Date
2001-06
ISSN
Published
2001-06
Author(s)
Gomez-Lobo, Andres
Abstract
To guarantee adequate and affordable
water and sanitation services for vulnerable households,
Chile introduced an individual means-tested water
consumption subsidy a decade ago. Although the public
authorities determine how the subsidy is applied, the mostly
private companies deliver the service - under a scheme with
built-in incentives to ensure cost-effective service
delivery by the companies and low wastage by the customers.
This case study reviews Chile's experience of using
tax-funded subsidy payments, contingent on delivery of
service by water companies. Funding the subsidy through
general taxation allows the regulator to set tariffs
according to economic criteria. Targeting allows scarce
resources to be directed to those who need subsidies most.
Both characteristics reduce the financial burden on the
government as compared with the universal subsidy used in
the past.
Citation
“Gomez-Lobo, Andres. 2001. Incentive-Based Subsidies : Designing Output-Based Subsidies for Water Consumption. Viewpoint. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/2f38d147-56ae-5cc4-a0a3-de546eb16c00 License: CC BY 3.0 IGO.”
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