Low Cost but High Impact? The Effect of Rainwater Harvesting on Poverty

The Millennium Development Goal to eradicate extreme poverty, via targets such as halving the proportion of people without sustainable access to safe drinking water, is challenging for many developing countries. Small state budgets combined with the geographic characteristics of developing countries (low population density etc.) imposes economic barriers to the expansion of the piped water-grid and, consequently, calls for alternative, low-cost solutions for water supply. This paper assesses the impact of a low cost water supply policy on reducing the incidence of household poverty  in areas characterized by a lack of piped water. Exploiting household data from the Brazilian semi-arid areas, we find that rainwater harvesting infrastructure provided to households effectively reduces poverty. This is achieved through mainly three channels. First, rainwater harvesting relaxes time constraints for household members who, instead of spending many hours every week fetching water from a distant water source, may now shift time allocation patterns towards productive activities such as the labor market, home production, and human capital accumulation. Second, households use the additional amount of water to scale-up livestock and agricultural production. Third, the better quality of rainwater compared to traditional water sources (river, ponds. etc.) has a positive effect on household health which, in turn, increases the effective labor of the household.

JEL Classification: I32, I38, L95, Q25

Keywords: poverty, access to water, shocks, risk coping, natural disasters