Free Distribution or Cost-Sharing? Evidence from a Malaria Prevention Experiment

49 Pages Posted: 20 Oct 2008

See all articles by Jessica Cohen

Jessica Cohen

The Brookings Institution

Pascaline Dupas

Dartmouth College - Department of Economics

Date Written: October 2008

Abstract

It is often argued that cost-sharing -- charging a subsidized, positive price -- or a health product is necessary to avoid wasting resources on those who will not use or do not need the product. We explore this argument through a field experiment in Kenya, in which we randomized the price at which prenatal clinics could sell long lasting anti-malarial insecticide-treated nets (ITNs) to pregnant women. We find no evidence that cost-sharing reduces wastage on those that will not use the product: women who received free ITNs 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 average prenatal client in the area 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 ITNs increases from zero to $0.75 (i.e. from 100 to 87.5 percent subsidy), the price at which ITNs are currently sold to pregnant women in Kenya. We combine our estimates in a cost-effectiveness analysis of ITN prices on child mortality that incorporates both private and social returns to ITN usage. Overall, our results suggest that free distribution of ITNs could save many more lives than cost-sharing programs have achieved so far, and, given the large positive externality associated with widespread usage of ITNs, it would likely do so at a lesser cost per life saved.

Suggested Citation

Cohen, Jessica and Dupas, Pascaline, Free Distribution or Cost-Sharing? Evidence from a Malaria Prevention Experiment (October 2008). NBER Working Paper No. w14406, Available at SSRN: https://ssrn.com/abstract=1286410

Jessica Cohen (Contact Author)

The Brookings Institution ( email )

1775 Massachusetts Ave., NW
Washington, DC 20036
United States

HOME PAGE: http://www.brookings.edu/experts/cohenj.aspx

Pascaline Dupas

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States

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