Exposure to fecal contamination is a leading cause of childhood infectious diseases in low- and middle-income countries. Low-quality sanitation infrastructure and inadequate maintenance can make on-site solutions prone to spillage, exposing children to sewage. This paper uses a unique dataset with independent verification of sewage in and around the parcels of more than 20,000 houses with on-site sanitation in peri-urban Bolivia. We analyze the relationship between exposure to sewage from overflowed sanitation infrastructure and the incidence of diarrhea in children under age five. The presence of sewage is associated with a 4 percentage point increase in the probability of diarrhea incidence – a relative increase of 22%. This relationship is driven by sewage within the boundaries of the property where the child resides, which is associated with a relative increase of 30% in the probability of the incidence of diarrhea. Our spatial analysis of sewage density shows that the probability of the incidence of diarrhea increases with the concentration of sewage in the immediate vicinity of the child's residence, suggesting negative spillovers from neighbors with overflowed on-site sanitation facilities. These potential negative health externalities provide a persuasive argument in favor of public interventions that adequately remove and treat fecal sludge.

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