In recent decades, Latin America’s water and sanitation infrastructure has expanded to the point that around 90% of the urban population has access to improved water services and, as a result, the region seems to be advancing towards two of the UN Sustainable Development Goals: the availability and sustainable management of water and sanitation for all and a reduction in inequality.
But on closer examination, not only do disparities remain, affecting lower income households who have lower access to water and lower service quality. Those households also pay a greater share of their income on water.
Income taxes should be able to achieve redistributive goals when governments are able to accurately measure incomes. But the challenge is greater in developing countries, such as those in Latin America and the Caribbean, where informal labor markets and a lack of monitoring make such measurements difficult. In this context, the water and sanitation sector could play a crucial role in promoting equality. However, pricing structures, inadequate subsidy targeting, and problems in water service quality may actually exacerbate existing inequalities.
The Unequal Burden of Water Expenditures
In a recent study, we demonstrate how the disproportionate burden borne by lower-income households with regard to water expenses risks deepening economic inequalities.
Our study compares and analyses inequality measures of both water expenditures and income for Brazil, Colombia, Costa Rica, and Uruguay using data from the Americas Barometer of the Latin American Opinion Project (LAPOP). We find that water expenditures are more equally distributed than income in all four countries. This generates an “unequalizing effect” since households of all income levels tend to spend similar amounts on water. Water costs, in other words, place a disproportionate burden on lower-income households.
Lorenz Curve vs. Water Concentration
To quantify this regressive pattern, we compare the concentration curves of water expenditures with the Lorenz curves for income distribution in each country. The Lorenz curve illustrates income inequality by plotting the cumulative percentage of income against the cumulative percentage of the population, with a 45-degree line representing perfect equality. In contrast, the concentration curve for water expenditures reflects the cumulative share of water spending across households ranked by income. We consider tap water expenditures or total water expenditures, which also include other sources like bottled water and delivery trucks.
In all four countries, the water expenditure concentration curves lie closer to the equality line than the income Lorenz curve, indicating that water expenditures are more evenly spread across households than income. This pattern suggests that the cost of water is relatively uniform across income brackets, rather than scaled to them.
Looking at different water sources, we also find that total water expenditures, including tap water, bottled water, and water delivered by trucks, are distributed more similarly to income than tap water alone for Brazil, Costa Rica, and Uruguay. In contrast, we find the opposite for Colombia. This seemingly more equitable outcome may hide underlying inequalities in coping with water quality issues. Wealthier households, we show, tend to consume more bottled water due to concerns about tap water quality, an option that lower-income households may not be able to afford.
Policy Implications
Water and sanitation in Latin America are heavily subsidized, with subsidies accounting for about 1.96% to 2.4% of regional GDP. But water tariffs for redistributive purposes inadvertently exclude households without access to water services, potentially leaving those in greatest need behind. And inconsistent and varying eligibility criteria may exclude other economically disadvantaged households, failing in the process to serve a redistributive function.
The way forward demands more targeted policies that include better subsidy targeting, different tariff structures, and improved water quality and reliability. By addressing these issues, policymakers can mitigate the unequalizing effect of water expenditures, reduce their regressive nature, and better foster both economic and social equity.
Leave a Reply