October 2014

Private Sector Participation and Performance of Urban Water Utilities in China

Yi Jiang, Xiaoting Zheng


In the early 1990s, China began opening its urban water sector to non-state capital to meet increasing urban water demand. By 2007, more than 30% of large and medium urban water utilities had attracted private sector participation (PSP), of which two thirds have non-state shareholders in majority. To understand the factors that drive PSP in urban water supply, and to answer the key policy question how PSP has impacted water utility performance, we assemble and analyze a unique dataset consisting of 208 urban water utilities servicing more than 300 million urban residents from 1998 to 2007. We find that utility’s profitability and liability level and host city’s road infrastructure in the prior year play important roles in driving private investors both enter and withdraw from the sector. It is further found that PSP utilities, and mainly those with majority non-state shareholders, have made substantial cost savings through employment downsizing and managerial expenses cut, which lead to remarkable profit increase. Other estimates, though statistically insignificant, show that PSP increases utility’s investment and efficiency, and PSP cities have lower total and domestic water supply but more domestic water users.




Air Pollution and Respiratory Ailments among Children in Urban India: Exploring


Arkadipta Ghosh, Arnab Mukherji


Using a multi-city sample from India we exploit city and fortnightly variation in air pollution to identify its causal effect on the incidence of a common respiratory ailment among children – cough. We account for key sources of confounding in this relationship with a two way fixed effects estimation strategy. Our results show that air pollution, specifically, particulate matter, has a large and negative health effect that is robust to alternative specifications. These effects are three times larger for children living in slums in comparison to children living outside slums. This suggests that improving urban air quality can lead to equity-enhancing health gains in developing countries. In addition, our falsification tests are able to rule out the possibility that the identified effects are due to other diseases unrelated to air pollution.




Education and Household Welfare

Marcel Fafchamps, Forhad Shilpi


Using census data from Nepal we examine how the partial derivatives of predicted household welfare vary with parental education. We focus on fertility, child survival, schooling, and child labor. Female education is not as strongly associated with beneficial outcomes as is often assumed. Male education often matters more, and part of the association between female education and welfare is driven by marriage market matching with more educated men. Controlling for the average education of parental cohorts does not change this finding. But when we use educational rank to proxy for unobserved ability and family background, the positive association between female education and beneficial outcomes becomes weaker or is reversed. For women the association between educational rank and outcomes is strong: women who obtain more schooling than their peers in school have fewer children and educate them better. In contrast, for men the statistical association between education and household welfare remains strong even after we control for educational rank within their birth cohort.




Learning (Or Not) in Health Seeking Behavior: Evidence from Rural Tanzania

Lucia Corno


The aim of this paper is to understand the functioning of individuals' health seeking behavior. It studies, theoretically and empirically, whether individuals change health care providers over time, depending on the health outcome (i.e. healed or sick) after consultation with the previous caregiver. Results show that the previous health outcome plays a crucial role in shifting individual preferences to a particular type of medical care. I find that patients, who healed after seeking health care, are more likely to seek care again in the future. Furthermore, conditional on seeking care, individuals are more likely to return to formal (informal) health providers with whom they had experienced a previous history of cures and switch away from formal (informal) caregivers with whom they had a negative outcome. I interpret these results as learning about clinicians’ quality over time. The effects are tested using 4 year panel data from a household survey in Tanzania.




Can Social Protection Work in Africa? The Impact of Ethiopia's Productive Safety Net


Guush Berhane, Daniel Gilligan, John Hoddinott, Neha Kumar, Alemayehu Seyoum


This paper evaluates a large social protection program in rural Ethiopia, the Productive Safety Net Programme (PSNP). The effectiveness of the PSNP is of interest because the program was implemented at scale in one of Africa's poorest countries, which has limited physical and communications infrastructure and scarce administrative resources. Using longitudinal survey data collected in 2006, 2008 and 2010 at the household and locality levels, we employ an extension of the propensity score matching method to continuous treatments to estimate the impact of transfers from the PSNP and a separate program on household food security. Against the formidable background of rising food prices and widespread drought, participation in the public works component of the PSNP has modest effects. The PSNP reduced the length of the last hungry season by 1.29 months among households that received transfers for five years compared to eligible households that received almost nothing. Five years of participation raises livestock holdings by 0.38 tropical livestock units relative to receipt of payments in only one year. There is no evidence that the PSNP crowds out private transfers. The joint impact of access to the PSNP along with a program that helps households to increase agricultural income and build assets is even higher. Having both of these programs reduced the length of the last hungry season by 1.5 months per year and increased livestock holdings by 0.99 tropical livestock units.




The Informal Sector Wage Gap: New Evidence Using Quantile Estimations on Panel Data

Olivier Bargain, Prudence Kwenda


We estimate the informal-formal sector pay gap throughout the conditional wage distribution using panel data from Brazil, Mexico and South Africa. We control for time-invariant unobservables and identification is stemming from inter-sector movers. We control for observables in a non-linear way using propensity score reweighting and carefully check for potential measurement errors. Using similar definitions of informality, we obtain consistent results for all three countries: Informally employed workers earn much less than formal workers primarily because of lower observable and unobservable skills. Estimates of the conditional wage gap show that they are also underpaid compared to their formal sector counterparts. In all three countries, the informal wage penalty is larger in the lower part of the conditional distribution and tends to disappear at the top, i.e., the informal sector increases wage dispersion. The magnitudes of these effects vary across countries, with the largest penalties in lower conditional quantiles of South Africa and more modest wage gaps in Latin America. We suggest explanations in line with different legal and labor market conditions.