Kremer, Michael, Jessica Leino, Edward Miguel, and Alix Peterson Zwane, NBER Working Paper No. 15280, (2010).

A randomized evaluation of spring water improvements in rural Kenya finds that water quality investments reduce fecal contamination by two thirds and child diarrhea and home water contamination by a quarter.  Additionally, it is found that common rights to spring water are social welfare maximizing at low income levels, but private property rights are social welfare maximizing at higher income levels, providing one reason why weak property rights may have persisted for so long in Africa.

Clean water provision has been a leading target of development assistance.  There are grounds for this focus, with diarrhoea causing 20 percent of child deaths under five annually.  One metric of progress towards the Millennium Development Goals is the fraction of people residing near improved water sources like protected natural springs.  However, critics allege that investing in water aside from that piped into the home is misguided.  They suggest that washing water, sanitation and hygiene, and contamination in transport and storage may be more important causes of diarrhoea than drinking water.  This debate has taken place in the absence of conclusive evidence from randomized trials, however.

In this study Kremer, Leino, Miguel, and Zwane conduct a randomized evaluation of the impact of spring improvements in rural Kenya on health outcomes.  Naturally occurring springs provide drinking water to 43 percent of households in rural western Kenya.  Though most springs are located on private property, Kenyan custom and law require that spring water be made available for free.  The authors estimate the value ascribed to spring improvement by rural households, and going a step further, they estimate the social welfare impacts of different types of property norms, including common holdings, freehold private holdings, and Lockean property rights. 

This study is novel in several ways.  It is the first randomized evaluation of the impact of water quality improvements, a favoured area of development assistance.  Secondly, it presents the first revealed preference estimates of the value of child health and a statistical life in a poor rural area, with findings that complicate prevalent assumptions in this area.  Thirdly, it shows that stated and revealed valuations of water interventions differ significantly.  Fourthly, by taking the data an interesting step further, it shows that common property rights can maximize social welfare at low income levels, but as incomes rise, private property rights are social welfare maximizing.

The authors conduct a randomized evaluation of spring infrastructure improvements conducted by International Child Support.  The NGO constructed fencing and drainage systems around each well and organized a user maintenance committee at a cost of $1024 per spring.  200 springs in rural western Kenya were randomly selected for protection.  16 were found unsuitable for improvement and were dropped, leaving 184 springs in the analysis.

The authors find that spring protection substantially improved water quality at springs and moderately in the house (decreasing fecal contamination by 66 percent and 24 percent, respectively).  This difference was ascribed to households gathering water from multiple sources and contamination in transport and storage.  Diarrhea among treatment household children fell by nearly a quarter.  Spring protection did not appear to crowd out other sanitation methods such as chlorination or boiling, and hygiene knowledge, latrine coverage, and education did not help households “better translate source water quality gains into larger improvements in household water quality.”

One puzzle is the health improvements were driven primarily by reduced diarrhea among girls.  The authors suggest that this finding prompts further investigation, considering that diarrhea rates were similar for boys and girls in the sample and that varying health impacts by gender “are rarely found in the related epidemiology literature.”

These findings are significant in that they provide conclusive evidence that spring protection interventions are successful in improving rural child health.  However, in the second half of the paper, the authors take the data further and discover some novel contradictions to the public health literature and shed light on the evolution of property rights systems.

By asking treatment group individuals how much they would value spring improvement and then analyzing how much they actually valued spring improvement after project completion, the authors are able to compare stated and revealed preferences.  Their revealed (i.e. actual) preferences value spring improvement at $2.96 per household per year.  This corresponds to $0.89 to avoid one child diarrhea event, $769 to avoid one statistical child death, and $23.68 to avoid the loss of one disability-adjusted life year (DALY).  What is remarkable about these number is that they are much lower than those in standard evaluations of the effectiveness of public health interventions, which hold that investments preventing the loss of one DALY for under $100-150 are appropriate.  Additionally, these figures provide evidence that the demand for health is income elastic in poor rural areas. 

In the final part of the study, they turn towards the question of why common property holdings are so prevalent in poor regions of Africa.  Interestingly, common property rights might not just be the result of weak institutions, but economic analysis shows that they might actually be welfare maximizing at low income levels.  The authors explain that:

“We first find that a freehold private property rights norm would yield lower social welfare than existing communal rights because the static losses from spring owners pricing above marginal cost outweigh the dynamic benefits of greater water infrastructure investment incentives, providing a rationale for why communal water norms in rural Africa have not generally been displaced by private property rights.  However, we estimate that as demand for clean water rises—for instance, at higher income levels—private property norms do yield higher social welfare than common property norms, potentially shedding light on the role that underlying economic conditions might play in the evolution of social norms and institutions.” 

For the area of rural Kenya studied, they calculate that less than a 20 percent increase in per capita income would make Lockean private property rights more social welfare maximizing than common property norms for springs.  They conclude by showing that allowing spring owners to charge for improved spring water while allowing free access to unimproved water would be Pareto improving over existing communal norms.  The interesting theoretical implication to arise from this study of springs is that “it would be risky to assume that causality always runs from stronger property rights protection to higher income levels.”