Sanitation economics: understanding why sanitation markets fail and how they can improve

Sophie Trémolet

doi:10.3362/1756-3488.2013.029

Sanitation economics: understanding why sanitation markets fail and how they can improve

Several studies have sought to evaluate the economic costs and benefits of investing in sanitation. These studies highlight the economic gains associated with improved sanitation, raising awareness among decision-makers of the importance of such investments. To increase our understanding of the sanitation sector, however, it is critical to go further and apply economics to the analysis of how sanitation markets work or, more often, fail, so as to identify potential improvements. Sustainable sanitation requires that several mutually dependent services be provided, including collection, transport, treatment, and reuse. In each of these segments, service delivery is often inadequate due to failures either on the demand or on the supply side. Investments by households or service providers are driven by their own perception of economic benefits rather than macroeconomic arguments. This paper argues that economics can be used to evaluate what drives decisions across all these segments and support public policymaking to ensure access to sustainable sanitation services.

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