Publication: Designing Direct Subsidies for the Poor : A Water and Sanitation Case Study
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Date
2000-06
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2000-06
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Direct subsidies are an increasingly popular means of making infrastructure services more affordable to the poor. Under the direct subsidy approach, governments pay part of the water bill of poor households that meet certain criteria. This approach was first used in water sector reforms in Chile in the early 1990s and is an alternative to the traditional method in which governments pay subsidies directly to utilities, often allowing the price of water to fall below economic costs indiscriminately. This Note illustrates how simulation techniques can be used to inform the design of direct subsidy schemes, ensuring that they are both cost-effective and accurate in reaching the target population.
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“Gómez-Lobos, Andrés; Foster, Vivien; Halpern, Jonathan. 2000. Designing Direct Subsidies for the Poor : A Water and Sanitation Case Study. Viewpoint. © World Bank. http://hdl.handle.net/10986/11428 License: CC BY 3.0 IGO.”
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Publication Designing Direct Subsidies for Water and Sanitation Services : Panama—A Case Study(World Bank, Washington, DC, 2000-05)As an alternative to traditional subsidy schemes in utility sectors, direct subsidy programs have several advantages: they are transparent, they are explicit, and they minimize distortions of the behavior of both the utility, and the customers. At the same time, defining practical eligibility criteria for direct subsidy schemes is difficult, and identifying eligible households may entail substantial administrative costs. The authors, using a case study from Panama, discuss some of the issues associated with the design of direct subsidy systems for water services. The conclude that: 1) There is a need to assess - rather than assume - the need for a subsidy. 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