Labor Seminars Amsterdam

Alessandro Tarozzi (Universitat Pompeu Fabra, Spain)
Tuesday, 3 October 2017

Lack of reliable information on environmental risk is often a key constraint limiting the extent of riskavoiding behavior in developing countries. The existence of private markets may be important if households cannot rely on the public sector to provide information, but fees may severely limit demand, especially among the poor. Such considerations are salient in Bangladesh, where naturally-occurring low-dose arsenic (As) is frequently present in tubewell water, a primary source of drinking water for millions of households. Because As contamination varies considerably across space, even within very narrow areas, the provision of information on As contamination has been shown to be e ective at allowing households relying on unsafe water to switch to safer and nearby sources. However, the safety status of millions of tubewells remains unknown, and there is no well-established market for tests. In this paper, we describe results from a randomized controlled trial in 128 villages in Sonargaon, Bangladesh, where tests were sold under di erent conditions. At a relatively low price of BDT45 (about USD0.60) only about one in ve households purchased a test, despite widespread awareness about As risk and infrequent knowledge about the safety of one’s drinking water. Sales were increased neither by \nudges” in the form of visible metal placards indicating safety status, nor by o ers that attempted to promote
the sharing of safe water through informal agreements, but contracts requiring payment only in case of \good news” more than doubled demand. Conditional on learning about the unsafe status of one’s tubewell water, informal agreements, visible placards, and fees-for-good-news (but only at lower prices) nearly doubled the fraction of households which stopped drinking water from contaminated wells, likely due to both selection and di erential impacts conditional on purchase. Further, our calculations indicate that both informal agreements that promote water sharing and charging fees-for-good-news (at low prices) were the most cost-e ective selling schemes. Joint with Ricardo Maertens, Kazi Matin Ahmed, and Lex van Geen.