Health Policy: Demand and Supply

How can we increase the demand for health interventions? One study found that when they gave households a voucher for a free, treated bed net, they were not only more likely to go get their bed net and use it than households given a voucher for a reduced price bed net, but when the researchers returned a year later those households were also more willing to pay for a new bed net than those who had received the smaller vouchers. On the other hand, another study showed an opposite effect for deworming medicine: households found out about the side effects and were less eager to try it again.

A recent DFID paper argues that cash transfer problems are better at addressing demand-side constraints to receiving health or education services than they are at addressing supply-side constraints. Thinking about it like that, this ought to be obvious. Simply handing people money, even handing money with conditions attached, is not going to significantly improve outcomes if teachers or medical staff don’t show up, or if their illness is poorly diagnosed.

It’s not just developing countries that have serious supply-side constraints and even absenteeism. From a report on education problems in southern California (HT: Newmark):

Colgan came to Southern California in 2008 and went to work at Charles R. Drew Middle School, where she taught eighth-grade math. Her message the first day was unequivocal: She expected her students to achieve, and she would do her part to see that they did. "I will show up every day," she told them.


They did not immediately believe her. At the end of that first day, several of her students asked if they would see her again. Many had not had consecutive weeks with the same teacher for years.

Even granting the bias obvious in the rest of the article and its desire for overly simplified public choice narratives, that ought to be a clear signal of something seriously wrong with the system. Vouchers or fairly large cash transfers could begin addressing that, but only if there is enough room in private schools for all those students and only if the education system allows that freedom of choice.