I would think that the association between the two would be so confounded by other macro and micro-level variables that you'd have a hard time making the case for causality (which would be the basis for your model to estimate cost reductions).

Thank you Ariel, I shall take your advice into account and be careful when defining the causality.

Hi Manfred, the following report may be of interest to you:

http://www.wsp.org/sites/wsp.org/files/publications/ESI-Bangladesh-Brochure.pdf 

Thank you Tayyab, this report will be very helpful in my research. The numbers are impressive, but there is no sample calculation to show how they were arrived at. 

You might look at Guy Hutton's work with WHO http://www.who.int/water_sanitation_health/wsh0404.pdf

It describes his methodology but doesn't give an explicit formula per se.  This World Bank document has some references that may be helpful http://www.un.org/en/events/toiletday/pdf/Planners-Guide-Fact-Sheet-2_English.pdf

-cam

http://www.who.int/water_sanitation_health/wsh0404.pdf

The relation between sanitation and public health goes back to the 1790's and Valnetine Seaman's article on yellow fever in New York City. It continued with the sanitation efforts of Edmund Chadwick in England and his epic study of the "working classes" published, I think, in 1843. Indeed, public health was first called "sanitary science" and grew out of the recognition that good sanitation and safe water were necessities if diseases in urban communities were to be limited. Now you ask about not public health but "health care". Obviously, however, all this literature was on reducing illnesses (dysentary, cholera, yellow fever, and so on) and thus making sanitary infrastructure an essential part of health care by the ruling bureaucracy. Other more contemporary examples can be cited as well. For a review of some of this literature see my Disease Maps: Epidemics on the Ground (Univ. Chicago Press, 2012). 

Thank you kindly for your input, Cameron and Tom. I shall read up on it.