This paper examines the effects of the expansion of the water network in urban shantytowns in Argentina. We find large reductions in the presence, frequency and severity of diarrhoea episodes among children reached by network expansions relative to a control group. Moreover, expanded connections induce savings in water expenditures, as these families are able to substitute piped water for more expensive and distant sources of water provision. These health and savings effects are also important for households that previously had clandestine self-connections to the water network, which were free but of low quality. Copyright (c) The London School of Economics and Political Science 2008.