Performance-Based Incentives for Health: Demand- and Supply-Side Incentives in the Nicaraguan Red De Proteccion Social

52 Pages Posted: 30 Jul 2007

See all articles by Ferdinando Regalia

Ferdinando Regalia

Inter-American Development Bank (IDB)

Leslie Castro

affiliation not provided to SSRN

Date Written: April 2007


Nicaragua's Red de Proteccion Social (RPS) is one of the first conditional cash transfer (CCT) programs implemented in a low-income country. Demand-side incentives, in the form of monetary transfers, are provided to poor households on condition that their children attend school and visit preventive health care providers. The design of the program is unique among CCT programs because these demand-side incentives are complemented by supply-side incentives aimed at improving the provision of health care. Health care providers are paid on the basis of their performance against predetermined targets. Both private and nonprofit health care providers contracted by the government extend the coverage of services to previously underserved areas.

While it is difficult to disentangle the individual impact of performance-based, demand-side interventions from the impact of performance-based, supply-side incentives, a rigorous evaluation of the program shows that their combination can work to increase the utilization of health services among the poor, and to improve health outcomes significantly. An evaluation undertaken ten months after demand-side incentives were stopped in certain areas revealed that the utilization of preventive health care services remained high. It is possible, therefore, that a well-targeted strategy of supply-side, performance-based incentives on its own may be sufficient to maintain high levels of health care service utilization, at least among poor households that have benefited from a relatively long period of education on the importance of preventive health care, while receiving demand-side financial incentives. However, the RPS evaluation results cannot exclude that, even after their removal, demand side incentives continue to exert, at least in the short term, a positive impact on service utilization. In the implementation of future RPS-type approaches, research efforts should focus on and be devoted to "unbundling the bundle" and assessing the relative contribution of supply vs. demand-side incentives.

Keywords: Health, Nicaraguan, Proteccion Social

Suggested Citation

Regalia, Ferdinando and Castro, Leslie, Performance-Based Incentives for Health: Demand- and Supply-Side Incentives in the Nicaraguan Red De Proteccion Social (April 2007). Center for Global Development Working Paper No. 119, Available at SSRN: or

Ferdinando Regalia (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Leslie Castro

affiliation not provided to SSRN

No Address Available

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