An analysis of nonpayment of water services in Nuevo Laredo, Mexico

In many developing and developed cities, nonpayment for water services undermines the financial health of water utilities; in poorer areas, it also hinders the water utilities' ability to serve poor households. However, nonpayment has not received much attention in the literature so far. In this paper, we analyze nonpayment for a unique data set of households from Nuevo Laredo, Mexico. Our fieldwork and basic statistics indicate that nonpayment is very common and affects both poor and affluent households, so ability to pay may only partly explain nonpayment. Using panel data models to control for unobserved household characteristics (to avoid omitted variable bias) and after accounting for monthly effects, we find that long-term delinquent households consume similar to 3% more water than do other families; this number is larger for households who are retired and affluent, which further compounds the adverse consequences of nonpayment.