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Free Distribution or Cost-Sharing: Evidence from a Malaria Prevention Experiment in Kenya
There is a general consensus that public health goods with positive externalities should be publicly financed. But, at the same time, the share of the cost borne by beneficiaries is subject to debate. Some argue that charging for health programs is likely to increase their usage intensity. In theory, those who pay a positive price for a good will value it more compared to those who receive it for free, and are thus more likely to use it. As a result, charging a fee selects out those who do not value the good and is more likely to place it in the hands of those who will use it. In addition, the psychological "sunk cost" effect may induce people to use it. While cost-sharing may increase usage intensity relative to free distribution, it also could reduce program coverage, as charging positive prices reduces demand for the good. And if people who cannot afford the price are more likely to be sick, selecting these people out could significantly reduce the health benefits of the subsidy. A clear and careful analysis of the tradeoffs between using free distribution and cost-sharing - between using full and partial subsidies - is critical to ensure that health interventions have the maximum impact on health outcomes. In this project, conducted in Western Kenya, IPA is studying the impact of distributing long-lasting insecticide-treated mosquito nets (LLINs) to pregnant women through prenatal clinics at randomly-varying prices. The program targets pregnant women, because these women and their babies are most vulnerable to acquiring and suffering severe consequences from malaria. Sleeping under a treated bednet is a very effective method for preventing malaria. In the first stage of the evaluation, we randomly select sixteen health clinics to receive LLINs at a subsidized rate that varies between clinics from 85 to 100 percent, and four control clinics with no LLIN distribution program. The second stage of the evaluation continues as the first, but clinics randomly offer a further discount to women who have already chosen to buy the net. This second stage is intended to allow separate estimation of the selection and sunk cost effects of price on usage.
Results
We find no evidence that cost-sharing reduces wastage on those that will not use the product: women who received free LLINs are not less likely to use them than those who paid subsidized positive prices. We also find no evidence that cost-sharing induces selection of women who need the net more: those who pay higher prices appear no sicker than the prenatal clients in the control group in terms of measured anemia (an important indicator of malaria). Cost-sharing does, however, considerably dampen demand. We find that uptake drops by 75 percent when the price of LLNs increases from zero to $0.75, the price at which LLNs are currently sold to pregnant women in Kenya. We combine our estimates in a cost-effectiveness analysis of LLIN prices on infant mortality that incorporates both private and social returns to LLIN usage. Overall, given the large positive externality associated with widespread usage of LLINs, our results suggest that free distribution is both more effective and more cost-effective than cost-sharing. |
Project Overview
Researchers
Pascaline Dupas, Jessica Cohen
Sectors
Health
Themes
Behavioral Economics
Research Questions
How is the demand for bednets to prevent malaria affected by price (free vs. minimal cost-sharing)? How can we get more people to use anti-malarial bednets? Are pregnant women who receive free bednets to prevent malaria less likely to use them than those that paid a small part of the cost?
Country
Kenya
Sample
Prenatal clients
Status
Complete |
