Does Clean Water Make You Dirty?: Water Supply and Sanitation in the Philippines

Water supply investments in developing countries may inadvertently worsen sanitation if clean water and sanitation are substitutes. This paper examines the negative correlation between the provision of piped water and household sanitary behavior in Cebu, the Philippines. In a model of household sanitation, a local externality leads to a sanitation complementarity that magnifies the compensatory response. Empirical results are consistent with the hypotheses that clean water and sanitation are substitutes and that neighbors’ sanitation levels are complements. In this situation, clean water may have large unintended consequences.