Being informed matters: Experimental evidence on the demand for environmental quality

A randomly selected treatment group of households in Gurgaon, India was informed whether (or not) their drinking water had tested positive for fecal contamination using a simple test costing about $0.50. Households that were not initially purifying their water, and were told that their drinking water had tested positive, were 11 percentage points (p-value < 0.01) more likely to begin some form of home purification in the next 7 weeks than households in the control group that received no information. This effect raised the mean purification expenditure in the sample by 10 percent. By way of comparison, an additional year of schooling of the most educated person in the household, raises the probability of (initial) purification by 4.4 percentage points while a move from one wealth quartile to the next raises it by 15 percentage points. Households that received a negative test result were not significantly different in their behavior than control households. Gurgaon is considerably wealthier than the average Indian city, yet awareness about the causes of diarrhea is low.