Thursday, November 12, 2020

Lead in Drinking Water and Birth Outcomes: A Tale of Two Water Treatment Plants

The recent drinking water crisis in Newark, New Jersey's largest city, has renewed concerns about the lead-in-water crisis becoming a persistent and widespread problem owing to the nation's aging infrastructure. We exploit a unique natural experiment in Newark, which exogenously exposed some women in the city to higher levels of lead in tap water but not others, to identify a causal effect of prenatal lead exposure on fetal health. Using birth data that contain information on mothers' exact residential addresses, we find robust and consistent evidence that prenatal exposure to lead significantly raises the probability of low birth weight or preterm births by approximately 1.4 to 1.9 percentage points (14-22 percent), and the adverse effects are largely concentrated among mothers of lower socioeconomic status. Our findings have important policy implications in light of the long-term impact of compromised health at birth and the substantial number of lead water pipes that remain in use as part of our aging infrastructure.
With infant health being an important predictor of later-life outcomes, these estimates are critical towards evaluating the cost-benefit calculus of infrastructure investments, including replacing all of the nation’s lead service lines, an initiative supported by the EPA as well as many states and communities at a potential cost of between $29 to $47 billion (EPA, 2019)... The EPA (2019) noted 6.1–10 million lead service lines (LSL) nationally, with an average estimated replacement cost of $4,700 per LSL
In March 2019, Newark commenced a program to remove and replace all of the city’s lead service lines in the water system at no cost to the homeowner, at a projected public cost of $90–$180 million. With the lifetime societal economic burden of a preterm birth estimated to be approximately $66,331 2018 dollars. The Institute of Medicine (2007) estimated the societal burden of a preterm birth to be $51,589 in 2005 dollars. The societal cost of the lead crisis in Newark could amount to $1.99–$2.65 million per year, just from an estimated increase of 30 to 40 preterm births linked to the heightened lead exposure each year. [30 (or 40) preterm births×66,331 per preterm births = $1.99 million (or $2.65 million)],

Assuming a discount rate for public policy of 2 percent based on the social rate of time preference (Council of Economic Advisers, 2017), societal cost savings from averting this adverse fetal health could be between $100 and $133 million, significantly offsetting the cost of public infrastructure investment. [There is ... debate as to the appropriate discount rate to apply for public policy (see for instance, Council of Economic Advisers,2017; Li and Pizer, 2018) depending on the social rate of time preference or the social opportunity cost of capital, and the length of the time horizon under consideration. The U.S. federal guidance requires agencies to use both a 3% and a 7% real discount rate in regulatory cost-benefit analyses. Under this guidance, the societal cost savings of averting the adverse fetal health would be between $66.3 million and $88.3 million (social discount rate of 0.03) and between $28.4 million and $37.9 million (social discount rate of 0.07). Clearly, the cost implications are sensitive to the discount rate employed. With long-term real interest rates decreasing substantially over the past decade, a recent issue brief by the Council of Economic Advisers (2017) recommends lowering the estimate of the social discount rate in applications to public policy cost-benefit calculus.
by Dhaval M. Dave & Muzhe Yang
National Bureau of Economic Research (NBER)
Working Paper 27996; October 2020

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