Microcredit and Willingness to Pay for Environmental Quality: Evidence from a Randomized-Controlled Trial of Finance for Sanitation in Rural Cambodia
Journal of Environmental Economics and Management, Vol. 86: 121-140, November 2017, doi:10.1016/j.jeem.2016.11.004. PDF.
Abstract: Low willingness to pay (WTP) for environmental quality in developing countries is a key research question in environmental economics. One explanation is that missing credit markets may suppress WTP for environmental improvements that require large up-front investments. We test the impact of microloans on WTP for hygienic latrines via a randomized controlled trial in 30 villages in rural Cambodia. We find that microcredit dramatically raises WTP for improved latrines, with 60% of households in the Financing arm willing to purchase at an unsubsidized price, relative to 25% in the Non-financing arm. Effects on latrine installation are positive but muted by several factors, including a negative peer effect: randomly induced purchases by neighbors reduce a household's probability of installing its own latrine. On methodological grounds, this paper shows that a “decision-focused evaluation” can be integrated into academic analysis to provide insight into questions of general interest.
Survey instruments: Cambodia-BDM-Surveys.7z
Supplementary materials: BFGPSSW-JEEM-2017-SupplementaryMaterials.pdf
Pre-registration: https://www.socialscienceregistry.org/trials/37
Dataverse (replication code and data): doi.org/10.7910/DVN/SQDCJZ