Demand for Water Quality
Friday, Jan. 6, 2017 7:30 PM – 9:30 PM
- Chair: Al McGartland, U.S. Environmental Protection Agency
Credit Constraints, Discounting and Investment in Health: Evidence From Micropayments for Clean Water in Dhaka
AbstractLow rates of adoption of and low willingness to pay for preventative health technologies pose an ongoing puzzle in development economics. In the case of water-borne disease, the burden is high both in terms of poor health and cost of treatment. Inexpensive preventative technologies exist, but willingness to pay (WTP) has been observed to be low in a number of contexts. We study the effect of time payments (micro-loans or dedicated microsavings) on WTP for a ceramic water filter among 400 households in slums of Dhaka, Bangladesh. We use a modified Becker-Degroot-Marschak mechanism to elicit WTP from each household across several different payment plans. We obtain valuations from each household across all payment plans, which allows us to investigate the mechanisms behind differences in WTP across plans. We find that time payments significantly increase WTP: compared to a lumpsum up-front purchase, median WTP increases 83% with a six-month loan and 115% with a 12month loan. Similarly, coverage can be greatly increased: at an unsubsidized price (50% subsidy) coverage is 12% (27%) under a lump-sum but as high as 45% (71%) given time payments. We use our rich within-household WTP data, the design of the payment plans, and a simple structural model of time preference and credit constraints to investigate the mechanisms. We find that households are patient with respect to consumption of health inputs, but do exhibit impatience with respect to general consumption. We find strong evidence for the presence of credit constraints, and suggestive evidence of savings constraints.
(Not So) Gently Down The Stream: River Pollution and Health in Indonesia
AbstractWaterborne diseases are the leading cause of mortality in developing countries. We emphasize a previously ignored cause of diarrhea - upstream river bathing. Using newly constructed data on upstream-downstream hydrological linkages along with village census panel data in Indonesia, we find that upstream river bathing can explain as many as 7.5% of all diarrheal deaths. Our results, which are net of avoidance behavior, show no effect of trash disposal on diarrheal infections. Furthermore we find that individuals engage in avoidance behavior in response to trash disposal (visible pollutants) but not river bathing (invisible pollutants). We conduct policy simulations to show that targeting upstream individuals could generate substantial environmental and health savings relative to targeting downstream individuals. This provides a potential roadmap for low- and middle-income countries with limited resources for enforcement of water pollution.
The Effects of Information Provision on Avoidance Behavior: Evidence From the Flint, Michigan Drinking Water Crisis
AbstractIn April 2014, the city of Flint, Michigan switched its drinking water supply from the Detroit water system to the Flint River as a means to help ease the city’s financial troubles. This change in water supply unknowingly caused a major health crisis in the city. Over the past year and half, it has been revealed that the switch exposed Flint residents to dangerously high levels of lead, culminating in a declaration of a state of emergency in October 2015. In this paper, we use the events surrounding the Flint water crisis to explore three primary research questions. First, how does information provision affect avoidance behavior? Second, how does this behavior vary in the short-run, when risks are more uncertain, versus the long-run, as risks become more certain? Third, in the case of Flint, what are the economic damages from this informational failure and how does avoidance behavior help mitigate these damages? To answer these questions, we develop a theoretical model of avoidance behavior under uncertainty to make predictions of how individuals trade off costly avoidance behavior with costly health damages. We test our predictions using differences-in-differences research designs that examine weekly retail sales of bottled water and water filters for Flint versus other U.S. locations as well as unique housing sales data for Flint and surrounding areas using restricted data from Zillow.
- Q5 - Environmental Economics