Sanitation markets : using economics to improve the delivery of services along the sanitation value chain

The objectives of this paper are to identify how market failures affect the ability to extend appropriate and sustainable sanitation services alongside the entire sanitation value chain. We examine how economic analysis has mostly been used so far to assess the economic case for investing in sanitation overall, i.e. where‘sanitation’ is considered as a single market. We argue that, although this type of analysis can be useful to shift mind -sets and public attitudes, its usefulness is limited by a number of uncertainties affecting such economic valuation and by a fundamental difference between the evaluation of economic costs and benefits and the financial incentives that drive actual investment decisions (from both public and private actors) cross  the entire spectrum of sanitation markets along the value chain. Based on this finding, we investigate how economic analysis can help identifymarket failures in sanitation markets and potential interventions to make these sanitation markets work better. The paper examines in turn three main market segments alongside the sanitation value chain, starting with markets for providing ‘access’to sanitation (collection services), markets for transport and treatment activities and finally,markets for reuse services. [authors abstract]