Quantifying welfare effects in the presence of externalities: An ex-ante evaluation of sanitation interventions

Sanghmitra Gautam

Journal of Development Economics, 2023, vol. 164, issue C

Abstract: This paper analyzes the impact of externalities on household demand for sanitation and the subsequent welfare effects generated from policy interventions. A critical feature of household sanitation (e.g., toilets) is that the take-up generates externalities where the privately chosen level is less than the socially optimal. To analyze the impact of policy interventions, I explicitly model household choice, taking into account the interdependence of household decision-making within the village. I identify and estimate the model using micro-survey data from India. Using the estimated model, I show how untargeted price subsidies, although cost effective at increasing sanitation coverage, have a regressive effect. I contrast this policy response with a targeted cash transfer to households with children, which ameliorates the regressive impact at the expense of a lower take-up.

Keywords: Welfare; Demand; Externalities; Policy; Subsidy; Sanitation (search for similar items in EconPapers)
JEL-codes: C13 D12 D62 H23 I38 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:164:y:2023:i:c:s030438782300038x

DOI: 10.1016/j.jdeveco.2023.103083

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