Social and Financial Incentives for Overcoming a Collective Action Problem

CEnREP Working Paper 22-002


Addressing public health externalities often requires community-level collective action.Due to social norms, each person’s sanitation investment decisions may depend on thedecisions of neighbors. We report on a cluster randomized controlled trial conductedwith 19,000 households in rural Bangladesh where we grouped neighboring householdsand introduced (either financial or social recognition) rewards with a joint liabilitycomponent for the group, or asked each group member to make a private or publicpledge to maintain a hygienic latrine. The group financial reward has the strongestimpact in the short term (3 months), inducing a 7.5-12.5 percentage point increase inhygienic latrine ownership, but this effect dissipates in the medium term (15 months).In contrast, the public commitment induced a 4.2-6.3 percentage point increase inhygienic latrine ownership in the short term, but this effect persists in the mediumterm. Non-financial social recognition or a private pledge has no detectable effect onsanitation investments.

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