Child Health and Water Policy in Africa

Eighty percent of the illnesses and deaths in the developing world are the result of water-related diseases. Can frequently-controversial private sector participation in water and sewage services mitigate these problems? Research on this question is scarce. Consistent estimation of the effects of private sector participation (PSP) in the developing world is especially difficult since PSP is often a proposed solution to water sector problems. Additionally, PSP is often accompanied by grants, lending, and restructuring. Any rigorous analysis must partial out these effects as well. For these reasons, existing empirical research on the effects of PSP in the water sector has often ignored low income, developing countries. This is unfortunate since these are precisely the countries in which water policy is most critical. For example, while Africa contains ten percent of the world's population, it accounts for forty percent of deaths among children under age five. This paper uses a panel dataset of 22 African countries, at the sub-national region level, to shed light on the health effects of PSP in Africa while taking into account the potential pitfalls identified above. The present-year fraction of the world water market controlled by the country that originally colonized an African country is used as an instrument for PSP in that country. We find that the introduction of PSP is associated with a 19.5 percentage point decrease in diarrheal disease among children under age five. This finding holds after controlling for World Bank water and sewerage sector lending, IMF programs, and a host of other controls including sub-national region fixed effects and year fixed effects. World Bank water and sewerage sector lending is also associated with lower diarrheal disease rates; an increase of $0.10 in average annual per capita World Bank water and sewerage sector loans over the previous 5 years is associated with a drop in diarrheal disease prevalence of 1.2 percentage points. We find no evidence to suggest that PSP, World Bank lending, or IMF stabilization programs affect rates of access to piped water, suggesting that improvements in water quality or other channels explain the observed child health improvements.