Water, Spillovers and Free Riding: Provision of Local Public Goods in a Spatial Network
95 Pages Posted: 17 May 2018
Date Written: July 27, 2017
Both state and non-governmental organizations provide public goods in developing countries, potentially generating inefficiencies where they lack coordination. In rural Tanzania, more than 500 organizations have installed hand-powered water pumps in a decentralized fashion. I estimate the costs of this fragmented provision by studying how communities' pump maintenance decisions are shaped by strategic interactions between them. I model the maintenance of pumps as a network game between neighboring communities, and estimate this model using geo-coded data on the location, characteristics and functionality of water sources, and human capital outcomes. Estimation combines maximum simulated likelihood with a clustering algorithm that partitions the data into geographic clusters. Using exogenous variation in the similarity of water sources to identify spillover and free riding effects between communities, I find evidence of maintenance cost-reduction spillovers among pumps of the same technology and strong water source free-riding incentives. As a result, standardization of pump technologies would increase pump functionality rates by 6 percentage points. Moreover, water collection fees discourage free riding and would increase pump functionality rates by 11 percentage points if adopted universally. This increased availability of water would have a modest positive effect on child survival and school attendance rates.
Keywords: Local Public Goods, Spatial Network, Water, Spillovers, Free Rider Problem, Tanzania
JEL Classification: H41, L14, O13
Suggested Citation: Suggested Citation