NCPA - National Center for Policy Analysis

Government and the Effectiveness of Public Health Subsidies

August 10, 2015

Heavily subsidizing essential health products through existing health infrastructure has the potential to substantially decrease child mortality in sub-Saharan Africa. There is, however, widespread concern that poor governance and in particular limited accountability among health workers seriously undermines the effectiveness of such programs. A number of studies show that service provision in developing countries can be quite poor.

Researchers at the National Bureau of Economic Research performed innovative audits on bed net distribution programs in three countries (Ghana, Kenya and Uganda) to investigate local agency problems and their determinants in the allocation of targeted subsidies. Their study produced the following results:

  • 80% of those eligible received the subsidies as intended.
  • Leakage of the subsidies to the ineligible appears to be limited, even when the individuals are willing to pay for the subsidy.
  • Overall cost is only modestly driven up by mistargeting.
  • Ghana had the highest rate of bribery.
  • Kenya had the largest amount of benevolent (nonbribery) leakage of benefits.
  • It has been estimated that up to 63 percent of child mortality could be averted through targeted coverage of inexpensive health products.

The relatively high levels of performance we observe go against the growing conventional wisdom that service provision in developing countries is universally poor.

Source: Rebecca Dizon-Ross, Pascaline Dupas and Jonathan Robinson, "Government and the Effectiveness of Public Health Subsidies," National Bureau of Economic Research, July 2015. 


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