The importance of being informed: Experimental evidence on demand for environmental quality
To what extent does information affect the demand for environmental quality? A randomly selected group of households in an Indian city were informed whether or not their drinking water had tested positive for fecal contamination using a simple, inexpensive test kit. Households initially not purifying their water and told that their drinking water was possibly contaminated, were 11 percentage points more likely to begin some form of home purification in the next eight weeks than households that received no information. They spent $7.24 (at PPP) more on purification than control households. By way of comparison, an additional year of schooling of the most educated male in the household is associated with a 3 percentage-point rise in the probability of initial purification, while a standard-deviation increase in the wealth index is associated with a 12 percentage-point rise in this probability and an $11.75 rise in expenditure. Initially purifying households that received a "no contamination" result did not react by reducing purification. These results suggest that estimates of the demand for environment quality that assume full information may significantly under-estimate it.
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