Community Decisions to Insure Against Collective Risk: The Case of Maintenance Services for Rural Water Infrastructure

Abstract:

Collective risks threaten development at the global and local level. This study presents empirical evidence on investment decisions that protect the group from future losses. We focus on community decisions to prevent potential losses associated with the breakdown of rural water infrastructure by paying for maintenance services. We conduct a novel, incentivised framed field experiment in Kenya, with 864 participants in 144 communities. Using a one-shot threshold public goods game, we estimate the causal effect of risk on investments to prevent collective losses by introducing exogenous variation in the probability of pump failure. Subsequently, we investigate whether exposure to collective risks in a game setting affects intentions to counteract these risks in the real world. Experimental results show that group contributions to collective maintenance increase with risk. This result holds when evaluating real world intentions to sign up to professional services for rural water infrastructure several months after the experiment.