The Value of Clean Water: Evidence from an Environmental Disaster

Rodrigo Barbone Gonzalez, José Renato Haas Ornelas and Thiago Silva (thiagochris@gmail.com)

No 13273, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Clean water has a largely unknown economic value, particularly to small communities whose agricultural activities take place on river shores. In November 2015, the rupture of a mining tailings dam in the municipality of Mariana led to a record disposal of toxic residuals in southeast Brazil. A mud avalanche ran out for 600 km (373 miles) until it reached the Atlantic Ocean, leaving behind extreme ecological and economic damage in the Doce River basin. This is the largest environmental disaster in Brazil to date. We quantify the negative externalities using rich, identified, and comprehensive data from firm-to-firm electronic payments and individual-level consumer credit usage. We find that agricultural producers in affected municipalities received cumulatively 41% to 60% fewer inflows (income) from customer firms outside the affected zone three years after the disaster. Effects are driven by municipalities where the river shore is larger relative to the farming area. In these municipalities, individuals also faced an 8% fall in their credit card and consumer finance expenditures. This result is stronger for non-formal and high-risk workers. Thus, water contamination led to (first) production and (later) consumption decline with real effects on municipality-level agriculture and services output, causing a 7% decline in local GDP.

Keywords: water; Environmental disaster; Agriculture; Consumer credit; Payment system (search for similar items in EconPapers)
JEL-codes: C63 G01 G20 G21 G28 O16 O40 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-agr, nep-dev and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://publications.iadb.org/publications/english ... nmental-Disaster.pdf (application/pdf)

Related works:
Working Paper: The Value of Clean Water: evidence from an environmental disaster (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:13273

DOI: 10.18235/0005312

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library (bid-library@iadb.org).