Using data from a Jakarta household survey, the authors estimate a model of household defensive behaviour and illness allowing for some risk factors that are hidden to the analyst but, perhaps, known to the household. As predicted by a general preference-based theoretical model, defensive behaviour (washing hands after toilet) intensifies with exposure to contaminants, income, opportunity, and education. Diarrheal disease, in turn, is determined by these factors and by defensive behaviour.
The authors also find evidence, though weak, that pathogens are less harmful if they originate from within the household. Households are affected by water company decisions and management strategies, in particular, the frequency of interruptions, which interfere with defensive behaviour. These findings link the inadequate supply of water for domestic use, a publicly provided good, and the private actions of the household, which are driven by its preferences for consumption goods and health, resource constraints, and knowledge of the sources of contagion. Such findings are therefore important in guiding the intersectoral allocations of public funds as well as the balance between private and public budgets.