For both of these reasons, no further modeling is attempted here. However, the health chapter of the Guatemala Poverty Assessment incorporates a reduced form health production function estimation that incorporates coverage of modern utility services (with appropriate instrumentation). The reader is referred to the corresponding paper for more details (Marini and Gragnolati, 2001). In brief, the main finding of interest is that access to piped water and use to bottled water are both found to make a positive and significant contribution to the height of children in urban areas, but not rural areas. While use of propane gas in the household is found to have a positive and significant effect on height overall.

# **6.          Conclusions and Recommendations**

Evidence from the Guatemala LSMS 2000 shows that households that have access to modern utility services obtain important benefits.

- First, the cost of modern utility services is often considerably lower than the corresponding traditional alternative. The clearest example is that of households without electricity who pay implicit prices of more than US$11 per kilowatt-hour (more than 80 times the price of electricity) to illuminate with candles and wick lamps and power appliances with dry cell batteries.

- Second, access to modern services can substantially enhance the productivity of households and household-based micro-enterprise. Rural households with access to piped water and liquid propane gas for cooking, save around six man-hours per week compared with households who must go out to collect water and fuel wood. Furthermore, micro-enterprises with access to water and electricity are twice as profitable than comparable enterprises without access to these services, and the effect of a cellular telephone on micro-enterprise profitability is even larger.

- Third, some traditional substitutes for modern utility service are associated with adverse health impacts and may contribute to infant mortality. Although it is difficult to isolate the underlying causality, children from households with access to piped water and adequate sanitation are significantly less likely to suffer from diarrhea and overall physical stunting.

These benefits serve to highlight the importance of the commitments made by the Government of Guatemala at the time of the Peace Accords: to improve access of modern utilities services to traditionally disadvantaged groups. The events of recent years demonstrate that the commitments made in the Peace Accords have been honored. Since 1996, there have been major structural reforms in the electricity and telecommunications sectors designed to improve efficiency and promote investment. Furthermore, resources channeled towards rural expansion of electricity, water, and sanitation infrastructure have approximately tripled; both as a result of earmarking privatization revenues and due to an overall increase in the resources allocated to social funds.

Overall about 70% of Guatemalan households now have water and electricity. These services are close to universal in urban areas, but reach little more than half of rural households. Almost 90% of households have some kind of basic sanitation, though fewer than half of these have sewerage. About 20% of households subscribe to either a fixed line and/or a cellular telephone service. Around 17% of Guatemalan households do not have access to any kind of modern network utility service, leading a 49