Over the last decades, water supply and water quality have become important policy issues in Indonesia. At least 100 million people in Indonesia today do not have reliable service and access to clean water supplies, nor to adequate sanitation facilities. In line with the UN Millennium Development Goals and the World Summit on Sustainable Development, the objective of the Indonesian Government program for water supply and sanitation is to improve health conditions and subsequently increase productivity and quality of life (BAPPENAS, 2002). The main objective of the proposed research is to estimate economic benefits from improved availability and quality of water in Indonesia. Particularly: 1. Expanding the study by Koundouri and Yusuf (2004) by gaining insight into the development over time of the impacts of water supply types on rent via a hedonic pricing study. In contrast to the Koundouri and Yusuf approach, the longitudinal character of the 3-wave panel data set for Indonesia (IFLS data; see below) will be fully exploited. By means of Structural Equation Modeling (SEM) and continuous time modeling, the development of the impact of the various water supply sources on rent will be estimated. 2. In addition to rent, the study aims at estimating the benefits from improved water supply by evaluating the impact of water availability and quality on health by means of the cost of illness method. Special attention will be paid to the impact of the illness on productivity. This impact will also be evaluated over time to find out its development. 3. The third objective is to measure the total economic value of the benefit from improving the water quality of the Citarum River (in the Bandung area) by means of the CVM method on the basis of a sample drawn from the population in the Bandung area. The total benefit will be disaggregated into various components of use and non-use values and underlying individual motives will be identified. In this part of the study, SEM will also be applied.