Title: Water, Economics, and Policy in Developing Countries
Description: Water is essential for life, and access to sources of safe water and sanitation facilities is a first-order concern for economic welfare and general well-being. While the majority of residents in developing countries have access to improved water and sanitation services, many parts of the developing world lag significantly behind in this vital infrastructure. This dissertation studies policies aimed at increasing access, quality, and efficiency of improved water and sanitation (WS) services in developing countries. In the following three chapters, I focus on non-technological methods for improving service by eliminating the economic, political, and institutional barriers to safe water and sanitation provision. Chapter 1, “The Buck Stops Where? Federalism and Investment in the Brazilian Water and Sanitation Sector”, shows how weak institutions can undermine public goods service when multiple levels of government share responsibility of provision. In particular, I study how legal ambiguities regarding degrees of governmental authority can lead to systematic underinvestment in public utilities.

I examine the Brazilian water and sanitation (WS) sector, which presents an natural experiment of shared provision between state and municipality entities. I look at a legal reform that clarified the relationship between municipalities and states in a quasi-experimental, difference-in-differences framework, using an administrative, municipality-level panel dataset from 2001-2012. I find that when expropriation risk by state companies diminished - self-run municipalities almost doubled their WS network investment. This increase in investment led to a significant increase in access to the WS system in these municipalities. The analysis provides strong evidence that reforms that strengthen residual control rights and eliminate the threat of intra-governmental expropriation can lead to large increases in public goods investment. Chapter 2, “The Role of Basic Sanitation Plans on Service Provision: Evidence from Brazil”, investigates non-technological methods of increasing access to improved water and sanitation (WS) in developing countries.

In particular, it presents evidence of the efficiency gains that can be achieved in municipal water provision through the act of formulating and carrying out basic sanitation plans. I exploit the staggered roll-out in implementation of basic sanitation plans throughout municipalities in southern Brazil from 2007-2013. I find that, in the three years after the enactment of sanitation plans, municipalities increased the efficiency of their respective water systems through the tightening up of “leakages" in the system, both in terms of water distribution and bill payment. However, I find no significant increases in the degree of individual access to the systems, suggesting that in the relatively short-run, providers focus on improving the existing system as opposed to building out new infrastructure. Chapter 3, “(Not So) Gently Down The Stream: River Pollution and Health in Indonesia”, addresses the fact that waterborne 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 road map for low- and middle-income countries with limited resources for enforcement of water pollution.