Very Preliminary and Incomplete-Please Do Not Cite

In developing countries the most common policy responses to combat ill-health incidences like diarrhea have been through the public provision of water supply and sanitation systems. However, in a recent study Galiani et al. [JPE, Vol. 113, 2005] ex-amine the impact of the privatization of water services on child mortality in Argentina, and provide evidence in support of the privatization of water services. In this paper, we examine the determinants of ill-health incidences of households, and provide results that suggest the public provision of water supply or a regulated market provision that ensures access to safe water to each household in the community. We present a simple model of health externalities of households ’ hygiene behavior, showing how hygiene behavior of one household affects ill-health incidences of other households. Then us-ing a survey data of 1,402 households in rural Uttarakhand, India, we find that both household and community hygiene behavior are significant inputs in the determination of households ’ ill-health incidences, with the later having greater impact than the for-mer, over and above effects attributable to households ’ socioeconomic status. Thus in the presence of large health externality of the household’s hygiene behavior, which is strongly associated with the access to safe water, the private provision of water may not bring an optimal decrease in ill-health incidences