Abstract:
Although 81 percent of Santiago, Chile's households are connected to sewers, the sewage is dumped untreated into local rivers that are in turn used to irrigate farmers' fields. These practices have caused serious health problems including typhoid and, on occasion, cholera. A benefit-cost analysis prepared by consultants to the World Bank and the government in 1994 argues that the health benefits of treating sewage would exceed the costs of building and operating sewage treatment plants.
Learning Objective:
The case illustrates various difficulties in benefit-cost analysis, including the problems of estimating health effects, of valuing health effects in dollar terms, and of selecting the best alternatives for analysis.
