Don’t Drink the Water! The Impact of Harmful Algal Blooms on Household Averting Expenditure

Increasingly frequent Harmful Algal Blooms (HABs) are generating growing public concern and attracting new policy focus both across the United States and globally. One particularly acute problem with HABs is the potential impact on drinking water safety due to high levels of microcystin toxins in the public water supply. We study households’ averting expenditure in response to a HAB outbreak in the Toledo, Ohio water supply. Using household level data from the NielsenIQ consumer panel for bottled water purchases, we estimate both post-matching difference-in-difference models and household fixed effect models of averting behavior. Our estimates provide the first revealed preference estimates of averting expenditure associated with drinking water contamination by HABs. We find that household averting behavior in response to a 3-day water advisory persists beyond the transitory event period with a declining magnitude over time. Per household averting expenditure is approximately $3.60, providing a lower bound willingness to pay to avoid HABs in public drinking water supplies. Our results imply a total averting expenditure of $792,950 across all affected households serviced by the Toledo public water supply.