Water Supply and Sanitation

Water supply and sanitation are at their core a public health issue. Every year, 2.2 million people die from diarrheal diseases, a leading cause of which is unhygienic water and sanitation. Improving health and mitigating diarrheal morbidity and mortality is the underlying rationale for water and sanitation Millennium Development Goals, which call for reducing by one half those who lack access to safe and sustainable water and sanitation. In the US, David Cutler and Grant Miller have shown that piped water, centralized water treatment, and waterborne sanitation interventions were jointly responsible for most of the rapid decline in the child mortality rate in the early twentieth century. Tara Watson has demonstrated more recently the link between water and sanitation coverage and substantial health improvements on Native American Indian reservations.

The outstanding question is not whether water and sanitation prevent diarrheal diseases in a biomedical sense, but what interventions are appropriate and effective in settings in which piped water and sanitation are unavailable because of their expense. In much of Africa, rural residents typically live on their farms rather than being concentrated in villages. In such circumstances, policy often focuses on providing improved drinking water sources outside the home, such as communal taps, wells, and protected springs. In developing countries in rural Asia and Africa, feasible sanitation interventions are generally latrines of some sort. The health impacts and cost-effectiveness of these interventions and the urban equivalents of shared standpipes and septic tanks or shared toilet blocks are less well understood compared to our understanding of the epidemiological transition in developed countries. The challenge in identifying appropriate institutional mechanisms for service provision is also great.

This article critically reviews the evidence on the health and nonhealth benefits of water and sanitation investments that are common in developing countries. Evidence on valuation for these interventions has been explored, and the implications of the evidence on valuation for government policy to support improvements in this sector have been discussed. Some implications for a future research agenda have also been briefly highlighted.

Water Supply

Water Quantity

This article considers separately how quantity and quality of water affect health because different water supply interventions affect water quality and quantity asymmetrically. For example, adding chlorine to water affects quality but not quantity. In contrast, providing household connections to municipal water supplies to households that currently use standpipes is likely to have a bigger effect on the convenience of obtaining water, and thus on the quantity of water consumed, than on water quality. Much of the most convincing nonexperimental evidence on the health impact of water and sanitation makes it difficult to separate the impact of quantity and quality because the interventions studied both reduced the cost of collection and improved quality, making it unclear which route of disease transmission matters the most in practice.

In the 1980s and 1990s, nonrandomized studies were frequently cited as evidence that water quantity was more important for health impacts than was water quality. Some researchers argued that these results could be explained because increased availability and convenience of water facilitate frequent washing of hands, dishes, bodies, and clothes, thereby reducing disease transmission. There is indeed strong evidence that hand washing is important for health. However, it is difficult to assess the causal impact of water quantity on hand washing in the absence of randomized evaluations or other convincing identification. In the Section Water Supply, numerous randomized evaluations that have shown impacts of improved water quality on health is discussed.

Although impacts may be heterogeneous across settings, and caution is warranted in drawing general conclusions, the one available randomized evaluation finds that increasing the quantity of water while maintaining unchanged quality did not lead to significant health improvements. Researchers, Florence Devoto, Pascaline Dupas, Esther Duflo, and William Pariente examine provision of piped connections to homes in urban Morocco previously served by public taps. This increased the quantity of water used by the household, but did not improve water quality, because the alternative, chlorinated water from communal taps was of similar quality to the water received at home.

As part of a planned piped water service extension in Tangiers, Morocco, these researchers randomly selected half the households eligible for a first connection to receive (1) information about and an offer of credit toward a new connection and (2) administrative assistance in applying for credit. Take up was 69% (compared with 10% in the control group).

These researchers compared outcomes of those who received this treatment with outcomes for households in the control group. They found that piped water provision in this urban Moroccan context had few health benefits. There was no evidence for an impact of treatment on a subjective ranking of health of the family or on diarrhea in children under 6 years of age (although baseline rates were relatively low, with the average child in the control group experiencing 0.27 days of diarrhea in the past week). Households in the treatment group reported increasing their frequency of baths and showers: The number of times that respondents in the treatment group washed themselves (through baths or showers) during the past 7 days was 25% higher than in the control group. However, hygiene practices that required less water, such as hand washing, were not affected, according to self-reports.

It is not to be concluded that increased water quantity never yields health benefits. The benefits of increased water quantity may be context specific and require further research for a complete understanding. In particular, understanding when and how increased access to water leads to more hand washing is a research priority.

In the study mentioned above, having a piped water connection had substantial private benefits, despite the lack of impact on self-reported diarrhea, consistent with the evidence that most households that received information and an offer of credit toward a new connection were willing to pay for it. In particular, piped water connection saved time, which was spent for leisure and social activities. Measures of social integration and overall welfare improved. One year into the program and it was noted that, not only did the encouragement design result in high rates of take up in the treatment group, but also for these households, their average monthly water bill more than doubled, from 73 to 192 Moroccan dirhams, or US$9–24 a month (the previous cost came from households that took water from their neighbors). Other authors also note evidence of substantial willingness to pay for water quantity in observational studies.

Water Quality

Several randomized evaluations find that improvements in water quality reduce reported diarrhea. One study by Jessica Leino, Michael Kremer, Edward Miguel, and Alix Zwane examines source water quality improvements. The researchers estimate that protecting springs reduced fecal contamination, as measured by the presence of Escherichia coli bacteria, by two-thirds for water at the source but by only 25% for water stored at home. This is likely due in large part to recontamination in transport and storage within the household. Despite the incomplete pass-through of the water quality improvement, mothers reported approximately 25% less child diarrhea in the treatment group. The importance of recontamination suggests either to treat water at the point of use, close to the time of use, or to treat water in a way that provides residual protection, for example, with chlorine at a sufficiently high dose to remain at levels that provide disinfection for at least 24 h.

Household water treatment at the point of use, for example, with filtration or chlorine treatment, also reduces child diarrhea. The bulk of the evidence suggests that, with take up rates on the order of 70% (achieved via frequent visits and reminders to subjects), household water treatment reduces child diarrhea by 20–40%. There are multiple comprehensive reviews of this literature. Some question the validity of this literature because the outcome measure in these studies is typically mothers’ reports of child diarrhea. Studies with objective outcomes, infrequently measured, would be preferable. However, the extent of reporting bias in treatment groups would have to be very large to explain the reported reductions in diarrhea associated with cleaner water. To the extent that reporting bias lowers estimates of diarrhea in treatment and comparison groups, such bias may make it harder to statistically detect reductions in diarrhea. If the reductions in diarrhea were even a fraction as large as those estimated, water treatment would still be very cost-effective.

Because water treatment can be extremely cheap, even a 20–40% reduction in diarrhea makes water treatment extremely cost-effective. For a sense of how cheap it is to treat water, a 1.42-Ga generic bottle of bleach with approximately 6% sodium hypochlorite concentration sold at Walmart for $2.54 as of December 2009 has enough chlorine to treat 163 400 l of water. This corresponds to a price of $0.00002 per liter of water treated. Actual costs of treatment with chlorine are higher because chlorine used for treatment is normally at lower concentrations and the concentration quality has to be made more consistent. Nonetheless, under the assumptions that chlorination reduces diarrhea by 20–40% and that mortality reductions are proportional to reported morbidity reductions, the cost per disability-adjusted life year (DALY) of chlorine provision using the traditional social marketing approach is less than $40, considerably less than the benchmark of $100–150 per DALY saved that is typically used in health planning in low-income countries.


Health Impacts – Diarrhea

The methodology used to evaluate sanitation programs is diverse but generally weaker than that which has been used to identify the impacts of water on health. Many studies are cross-sectional, some are longitudinal, others compare differences between two ‘matched’ groups, but very few rely on a randomized design. Studies of sanitation often try to address omitted variable bias by controlling for variables suspected of being confounding or by ‘matching’ subsamples. This method can only attempt to control for observable characteristics, such as maternal education or income, but will not control for unobservable characteristics, such as health attitudes. Moreover, controlling for all possible confounding variables which could plausibly influence an outcome of interest is an impracticable undertaking.

Two more shortcomings of impact studies in the sanitation sector is that they neither have adequate sample size nor do they account for the fact that the interventions are provided at the community, rather than the household level. A large sample size is necessary to control for many factors in a multivariate regression. When interventions are targeted at the community level, individual households cannot be considered discrete observations because households within a community are likely to resemble each other, termed intercluster correlation. This ‘clustering’ means that a statistical test has less power to determine the existence and size of a treatment effect. Researchers point out that many early evaluations of sanitation compare an intervention village to a ‘control’ village, but this is tantamount to a sample size of two individuals because households within a village are not independent units of observation. Early reviews of health impact studies of water and sanitation interventions pointed out these methodological flaws and others.

Although there is broad consensus that improving sanitation will have a positive health impact, very few studies have established this causal effect in practice. In two survey papers, several authors critically examined the evidence for the health impacts of water, sanitation, and hygiene interventions alone or in combination. Despite the limited number of studies on sanitation interventions, these reviews suggest that sanitation is effective in reducing diarrheal illness, with a pooled relative risk estimate of 0.678 (with a 95 confidence interval of 0.529–0.868). Yet, the research on which these reviews are based has significant shortcomings. Of the four studies identified as sanitation specific, three were classified by the authors as poor quality. For example, two of these did not have an adequate control group and there was not clear or convincing measurement of confounding variables in two others. The only intervention studies were not randomized and used heterogeneous interventions and methodologies that prevented pooling of results. Moreover, nearly all combined sanitation with water or hygiene interventions, making it impossible to determine the contribution of sanitation alone.

In the ensuing years since these reviews, research quality has not improved dramatically. In a recent systematic review, researchers stressed the lack of rigorous evidence on the contribution of sanitation interventions to prevent diarrhea in young children. Others come to the same conclusion after conducting a Cochrane review of excreta disposal interventions to prevent diarrhea. A cohort study on the effectiveness of a city-wide sanitation intervention in Salvador in Northeast Brazil suffers from several of the methodological flaws reviewed above. For example, there is no external control group; the children, aged 0–36 months, are recruited from households where the intervention took place. The researchers simply compare the prevalence of diarrhea among two different cohorts of similarly aged children before and after the intervention and conclude that the intervention reduced diarrheal rates in children by 21%. Another shortcoming of the study’s design is that the main outcome of interest is self-reported diarrhea, which is problematic because of respondents’ recall bias and the bias introduced by frequent interactions with researchers. The single exception, to our knowledge, is a randomized-controlled trial of a community-lead total sanitation campaign (TSC) in 40 villages in Orissa, India. This study finds that the campaign increased child midupper arm circumference (MUAC) z-scores by roughly 0.25 standard deviations. However, the study lacked sufficient power to detect effects on diarrheal disease in children.

Health Impacts Beyond Diarrhea – Nutritional Status And Parasitic Infection

Recently, nutritionists including Jean Humphries have hypothesized that reducing a child’s fecal bacteria exposure during the first years of life through improved sanitation (and/ or hand-washing or water treatment) may improve gut function (the ability of the gastrointestinal tract to absorb nutrients) and subsequent growth. The prenatal period and the first 2 years of life are a critical window for intervention in growth and development: infection and poor nutrition during this window can negatively impact an individual’s long-term cognitive development and lifetime physiologic trajectory. The new hypothesis is that nutritional supplementation seems to be necessary but not sufficient to eliminate growth shortfalls because chronic infection and colonization of the gut by fecal bacteria, spread via poor conditions, impedes nutrient absorption and creates low-level immune system stimulation, a condition called environmental (or tropical) enteropathy.

If the environmental enteropathy hypothesis were to be correct, this would significantly alter our understanding of the health benefits associated with sanitation, and increase the estimated cost-effectiveness of these interventions. The change would likely be very large, because of the lifetime gains associated with better nutrition in early childhood.

Recent rigorous research suggests that avoiding worm infections in childhood brings not only better health outcomes, because of reduced anemia, but also better nonhealth outcomes. In an article with the memorable title ‘Worms at Work,’ randomized control trial data show that children without worms are less fatigued who go to school more and ultimately have higher incomes as adults. Complete sanitation services certainly reduce worm loads and infection rates; however, it is uncertain whether partial sanitation coverage is sufficient to do this. To the extent that feasible, affordable sanitation interventions reduce worm infections, the benefits associated with these sanitation investments may be much greater than suggested by health benefit calculations alone because of the associated lifetime schooling and wage increases.

Nonhealth Benefits Of Sanitation

Limiting the gains from sanitation to health benefits, however, ignores a growing body of evidence that indicates that people realize substantial nonhealth benefits from improved sanitation, such as convenience, safety, and dignity. Lack of facilities for defecation is a problem faced by everyone, but differing norms for behavior and modesty of women can make this especially problematic for them. Women and girls may be expected to defecate only when it is dark, which can increase urinary tract infection rates, chronic constipation, and psychological stress. Leaving the home for secluded areas after dark also makes women and girls vulnerable to physical assault. The challenges of menstrual management and the symptoms of the postnatal period compound these problems. Measuring the quality of life benefits for women from reduced stress or shame when sanitation services are available is very hard to do. Women and children in particular are targeted as primary users of sanitation for reasons including their privacy and security.

Suggestive evidence from the economic and sociological literature demonstrates that women’s participation is important for providing and managing local public goods. These frequent associations between women, sanitation, and public goods imply a need for a greater understanding and further research on both women’s and men’s roles in sanitation provision and behavior change.

Elastic Demand And The Subsidy Debate

This section considers the case for subsidies in the water supply and sanitation sector, with a particular focus on sanitation. Willingness to pay for water quantity has been well established, including in the setting in Morocco discussed above. Evidence on valuation of water quality has been summarized elsewhere. Subsidies for sanitation are currently at the center of a policy debate because of a new push to meet the MDGs and rethink old ways of doing business in that sector.

Supply-side interventions along with hardware subsidies have been the typical approach to rural sanitation. Traditional public finance reasoning supports such an approach on both efficiency and distributional grounds. Subsidizing sanitation hardware has been justified on the grounds that the public benefit far outweighs the private one. In addition, the high upfront costs of sanitation infrastructure necessitates subsidies for the credit-constrained poor. Even with hardware subsidies, the extra transportation and construction costs associated with latrine building may still be prohibitive for the extremely poor. One study in Mozambique found that the additional transportation and construction costs for a latrine made the already subsidized cost (only 5% of the household’s average monthly income) into a ‘medium’ cost which was too burdensome majority of the poor population.

Recent funding trends have begun to disavow subsidies in the sanitation sector. Community-led total sanitation, for example, is a new participatory methodology for sanitation behavior change which discourages the use of subsidies and emphasizes cost sharing by households instead. There are several nonrandomized, cross-sectional studies that have been frequently cited in the gray literature as evidence to support the case for cost recovery, rather than subsidies. One example of this comes from a report conducted by the Water and Sanitation Program in South Asia that compiled lessons learned from eight case studies of rural sanitation programs in Bangladesh, India, and Pakistan. Six of the eight case studies examined the TSC in India. The report compares programs offering full hardware subsidies (e.g., Andhra Pradesh TSC) to programs offering only partial subsidies (e.g., West Bengal TSC) and programs with full cost recovery (e.g., Plan Bangladesh). The analysis relied on data from interviews with key stakeholders and observations at selected villages that were included in the program and villages that were not included in the program. As emphasized above, such a methodology does not create a credible counterfactual. The study concludes that there is an association between high subsidies and poor program performance: the two worst performing programs (Andhra Pradesh TSC and Pakistan’s Lodhran Pilot Project) had the highest hardware subsidies. The report goes on to say that high hardware subsidies ‘reduce the sense of ownership by those that receive the heavily subsidized facilities’ and that there is ‘increasing evidence that (subsidies) tends to result in low toilet usage and wasted investments.’ Others also argue charging a fee for sanitation infrastructure will induce adoption, ownership, and more use.

There are three assumptions underlying the argument that cost recovery increases usage. First, higher prices may act as a ‘screening’ mechanism for those who most need the product because households will self-select into purchase. Second, positive prices are interpreted as a signal of quality. And third, purchase will increase use because households rationalize purchases ex post because of a ‘sunk-cost’ effect. The sunk-cost effect implies that the household pays a psychological cost whenever it buys a product that it subsequently does not use. Several researchers use similar methodologies to exploit variation in offer prices and purchase prices for water treatment products and bed nets, respectively, to test for evidence of the screening and the sunk-cost effects. Both studies agree that cost sharing drastically reduced demand and does not target those most in need. For bed nets, cost sharing did not reduce wastage. Higher willingness to pay is associated with a greater propensity to use the water treatment product. These two studies add to a growing body of empirical evidence which refutes the simple claim that a positive price effectively targets households who are more in need of a produce or makes use of the product more likely.

Whether and how much to subsidize sanitation falls into a much broader debate about cost sharing for health products in general. The empirical evidence points to an income elasticity of demand for health that is positive and above one in both developed and developing countries, which implies that even a small increase in income would result in a very large increase in the demand for the good.

Another consistent finding in the experimental literature is that there is a very steep demand curve for preventative health products, such as bed nets, water treatment, or deworming pills. The price elasticity of demand around zero is very large for people in lower income groups, meaning that even a small change in price can create a very large effect on demand for the good. For example, it was found that demand for deworming drugs dropped from 79% to 19% when the price was raised from 0 to 30 cents. Similarly, others found that raising the price of bed nets from 0 to 60 cents lowered demand by 60% points in Kenya and that a 13 cent increase in the price of water treatment lowered demand for the product by 30% points in Zambia. These dramatic findings would seem to defend full subsidies of health products with positive externalities for poor households.

The theoretical literature on externalities and the empirical evidence discussed above would seem to suggest that sanitation should continue to be subsidized. Subsidies may also have potential downsides, and these drawbacks in the sanitation sector need to be rigorously tested. Subsidies may lead to inefficient allocation in two ways. First, households may delay their decision to purchase and install sanitation infrastructure because of the expectation of receiving a future subsidy. And second, subsidies that follow purchase or construction may lead to overconsumption of the good to benefit from the subsidy. For example, a review of a sanitation progress in Andhra Pradesh, India, found that households had built expensive toilets to receive the subsidy, but abandoned them soon after. In addition, subsidization of sanitation infrastructure has been blamed for distorting the private supply market and artificially inflating hardware prices. And finally, in practice, elite capture of construction subsidies has meant that the transfer is not always received by the intended beneficiary.


Further research on the health externalities of improved sanitation and water quality would provide policymakers with the evidence they need to decide on whether and how much to subsidize these interventions. How subsidies might be best provided is another area for exploration, so that the pitfalls identified above can be minimized or avoided. An investigation of households’ valuation for improved sanitation, like the research that has been done on water quality and bed nets, would better inform policymakers in this debate.

Understanding how water and sanitation service bundle public and private benefits is also important in determining how to provide these goods. The majority of nonhealth benefits of sanitation, including reduced shame and stress, are likely what economists call ‘private benefits.’ Water quantity provides many private benefits, in terms of quality of life, whereas water quality may have a more public health character. Sanitation likely combines both attributes. Individuals are typically considered to be best placed to allocate limited resources between competing goals, to the extent that they are the sole beneficiaries of those goods, and thus it is often argued that donor, or public funds should be reserved for funding those investments that provide public benefits, not private ones, no matter how attractive the attributes of the private goods may be.

However, the case for investment in private goods can be stronger if a donor values the welfare of women and girls more than decision-making processes within households might. Despite the fact that women benefit disproportionately from sanitation and water services, if they have little ability to control how resources are spent, unmet demand may persist even if nominally affordable or seemingly attractive options are available. A donor may wish to support providing services that women want as a way of redistributing resources toward women. Untangling these issues remains a fruitful area of research.


Views presented in this article should not be construed to be those of the Bill & Melinda Gates Foundation or its leadership.


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Pricing and User Fees