The importance of being informed: experimental evidence on the demand for environmental quality

To what extent does information affect the demand for environmental quality? A randomly selected group of households in Gurgaon, India was informed whether (or not) their drinking water had tested positive for fecal contamination using a simple test kit costing less than $0.50. Households that were initially not purifying their water, and were told that their drinking water was contaminated, were 11 percentage points more likely to begin some form of home purification in the next 7 weeks than households that received no information. By way of comparison, an additional year of schooling of the most educated person in the household, is associated with a 4.4 percentage-point rise in the probability of initial purification, while a move from one wealth quartile to the next is associated with a 15 percentage-point rise. Households that received a "no contamination" result were not significantly different in their behavior from households that were not informed about their water quality. These results indicate that the issue of under-provision of information needs to be addressed when estimates of the demand for environmental quality are used for welfare or policy analysis.The data (Stata format) for this working paper is available at http://www.isid.ac.in/~som/