HEALTH ECONOMICS: Targeting health subsidies through a nonprice mechanism: A randomized controlled trial in Kenya

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Abstract

Free provision of preventive health products can markedly increase access in low-income countries. A cost concern about free provision is that some recipients may not use the product, wasting resources (overinclusion). Yet, charging a price to screen out nonusers may screen out poor people who need and would use the product (overexclusion). We report on a randomized controlled trial of a screening mechanism that combines the free provision of chlorine solution for water treatment with a small nonmonetary cost (household vouchers that need to be redeemed monthly in order). Relative to a nonvoucher free distribution program, this mechanism reduces the quantity of chlorine procured by 60 percentage points, but reduces the share of households whose stored water tests positive for chlorine residual by only one percentage point, substantially improving the trade-off between overinclusion and overexclusion.

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