To determine whether expenditure per capita should be treated as endogenous, we performed a Hausman specification test using the amount of land owned and husband's earnings as instruments. We failed to reject the hypothesis of no endogeneity of expenditure per capita.<sup>8</sup> The community endowment of services and infrastructure, especially the concentration of health facilities and providers, may also be nonrandom.<sup>9</sup> Three theories provide insight into how public programs are allocated across population groups: (1) according to altruism theories, public resources are allocated more heavily towards more disadvantaged areas; (2) pressure group theories suggest an allocation pattern of public resources that is directed towards areas with higher demand and more lobbying power; (3) efficiency criteria and externalities may also influence the allocation of government programs so that public resources are placed in order to maximize the overall well-being of the population (Pitt, Rosenzweig and Gibbons 1994). Hausman specification tests for endogeneity in a recent analysis of health care choices in Guatemala suggest that the placement of government health posts and centers in Guatemala is likely to be exogenous (Pebley, Goldman and Rodriguez 1996). However, access to private health facilities and providers may be endogenous since private facilities and providers may concentrate in wealthier areas where children tend to lie healthier.

Nevertheless, in our analysis, we treat the placement of all (public and private) community health care facilities and providers as exogenous to child health. Failing to control for the nonrandomness of community services may lead to biased emnpirical results and erroneous conclusions about the effectiveness of such programs. In theory, the problem of endogeneity with cross-sectional data can be dealt with by the use of instrumental variables techniques. The use of appropriate instruments, that is new variables that are correlated with the endogenous covariates but are not correlated with the error term, would purge the parameter estimates of simultaneity bias. However, in the case of placement of community services, a valid set of instruments is not available from the EGSF data.'<sup>0</sup>

- s In the first stage regression, husband's earnmings and owned land are significant at the 10% level and 5%level respectively. The R<sup>2</sup> is 0.20. The EGSF collected no infonnation on either unearned income or the value of household assets, which would be other valid instruments for household resource availability.

- For instance, Frankenberg (1995) notes thal several studies of health policies in Indonesia suggest that the distribution of health facilities, both public and private, is related to factors such as population density, level of socioeconomic development, integration into transport networks, and administrative rank, all of which may be related to morbidity and mortality.

- **0** If we had data for more than one point in time, we could use fixed-effects estimates to control for the endogenous placement of community services by estirrating how the _change_ in local programs affects the _change_ in children's growth. Note that the panel data should not be too closely spaced because short-term program changes are likely to be small and their effect not significant. Rosenzweig and Wolpin (1986) and Pitt, Rosenzweig and Gibbons (1994) have adopted the fixed effects methodology to control for the nonrandom spatial distribution of government programs in the Philippines and Indonesia. Because governments allocated schools and health and family planning programs in more disadvantaged areas first, OLS estimates based on the assumption of exogenous program placement indicate a negative impact of such services on children's growth. Conversely, estimates that control for endogenous program placement by differencing across the two time periods reveal a substantial and significant effect of %vernment programs.

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