Applied Economics Workshop Business 33610 Spring Quarter 2010 "spring Cleaning: Rural Water Impacts, Valuation and Property Rights Institutions" Spring Cleaning: Rural Water Impacts, Valuation and Property Rights Institutions

In many societies, social norms create common property rights in natural resources, limiting incentives for private investment. This paper uses a randomized evaluation in Kenya to measure the health impacts of investments to improve source water quality through spring protection, estimate the value that households place on spring protection, and simulate the welfare impacts of alternative water property rights norms and institutions, including common property, freehold private property, and alternative " Lockean " property rights norms. We find that infrastructure investments reduce fecal contamination by 66% at naturally occurring springs, cutting child diarrhea by one quarter. While households increase their use of protected springs, travel-cost based revealed preference estimates of households' valuations are only one-half stated preference valuations and are much smaller than levels implied by health planners' typical valuations of child mortality, consistent with models in which the demand for health is highly income elastic. Simulations suggest that, at current income levels, private property norms would generate little additional investment while imposing large static costs due to spring owners' local market power, but that private property norms might function better than common property at higher income levels. Alternative institutions, such as " modified Lockean " property rights, government investment or vouchers for improved water, could yield higher social welfare. and many seminar participants have provided helpful comments. Opinions presented here are those of the authors and not those of the Bill and Melinda Gates Foundation or its leadership. All errors are our own.