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A framework for analyzing tariffs and subsidies in water provision to urban households in developing countries
The aim of the paper is to present a basic conceptual framework for understanding the main practical issues and challenges relating to tariffs and subsidies in the water sector in developing countries. The paper introduces the basic economic notions relevant to the water sector ; presents an analytical framework for assessing the need for and evaluating subsidies ; and discusses the recent evidence on the features and performance of water tariffs and subsidies in various regions, with a special focus on Africa. The discussion is limited to the provision of drinking water to urban households in developing countries. Among the issues examined are: (i) What are the main questions that arise when governments want to subsidize access to and consumption of water? (ii) What are the key features of water tariffs and subsidies that have been implemented around the world? (iii) How can we assess the performance of various subsidy programs? (iv) How well have subsidies performed in practice? The final section of the paper briefly attempts to draw some lessons from the review of evidence undertaken in the previous sections.