With the help of one's neighbors: externalities in the production of nutrition in Peru.

Both public and private resources contribute to the nutritional status of children. In addition, the investments made by one household may contribute to the health of other households in the neighborhood through improvements in the sanitation environment and through increases in shared knowledge. This paper measures the externalities of investments in nutrition by indicating the impact of the education of women in Peruvian neighborhoods on the nutrition of children in other households, after controlling for the education and income of those households. We find that in rural areas this shared knowledge has a significant impact on nutrition, with the coefficient of an increase in the average education of women in the neighborhood being appreciable larger than the coefficient of education in isolation. In addition, we indicate the impact of the water and sanitation environment in the neighborhood, again controlling for the household's own access to sanitation and water. In both urban and rural areas, we observe externalities from investments in such household level infrastructure with the evidence particularly strong for sanitation made by neighboring households.