Estimating the Impact of Means-tested Subsidies under Treatment Externalities with Application to Anti-Malarial Bednets

Abstract

Regular use of effective health-products such as insecticide-treated mosquito nets (ITN) by a household benefits its neighbors by (a) reducing chances of infection and (b) raising awareness about product-effectiveness, thereby increasing product-use. Due to their potential social benefits and high purchase price, causing free-riding and sub-optimal private procurement, such products may be subsidized in developing countries through means-testing. Owing to associated spillover effects, cost-benefit analysis of such subsidies requires modelling behavioral responses of both the subsidized household and its neighbors. Using experimental data from Kenya where subsidies were randomized, coupled with GPS-based location information, we show how to estimate aggregate ITN use resulting from means-tested subsidies in the presence of such spatial spillovers. Accounting for spillovers introduces infinite-dimensional estimated regressors corresponding to continuously distributed location coordinates and makes the inference problem novel. We show that even if individual ITN use unambiguously increases with increasing incidence of subsidy in the neighborhood, ignoring spillovers may over-or under-predict overall ITN use resulting from a specific targeting rule, depending on the resulting aggregate incidence of subsidy. Applying our method to the Kenyan data, we find that (i) individual ITN use rises with neighborhood subsidy-rates, (ii) under means-testing, predicted ITN use is a convex increasing function of the subsidy incidence and (iii) ignoring spillovers implies a nearly-linear increasing relationship leading to over-estimation of ITN use at lower and under-estimation at higher subsidy rates.

Spillover effects on health outcomes in low- and middle-income countries: a systematic review

“…One found evidence of negative spillovers, 46 eight found no evidence of spillovers 66–73 and eight found evidence of spillovers for some but not all outcomes or conditions reported. 21 , 37 , 38 , 50 , 74–77 These studies measured spillovers through four mechanisms among untreated individuals who were: (i) in areas where cash transfers were offered; (ii) in or near areas where subsidies or microloans were offered to promote certain health products or behaviours (e.g. subsidies for vaccines); (iii) socially connected to treated individuals; or (iv) in the same schools or areas as treated individuals, regardless of social links.…”

“…Two of four studies evaluating spillovers of subsidies or microloans for health products found evidence of spillovers. 21 , 50 , 69 , 77 For example, in a study of incentives for immunization, Banerjee et al. estimated both total and spillover effects.…”

“…Recently, spillovers have increasingly been framed as a quantity of interest themselves, particularly in economics where a growing literature describes spillovers of interventions including school-based deworming 2 and insecticide-treated bed nets. 21 On the whole, methods for estimating spillovers have developed independently within disciplines.…”

Impacts and Determinants of Health Levels in Low-Income Countries

“…Recent research has made methodological progress in understanding how to most efficiently estimate externality effects, and how to address the possibility of nonlinearities in the relationship and complementarities with local treatment decisions. Bhattacharya et al (2013) exploit experimental variation combined with detailed geospatial information to estimate how the local subsidy rates faced by others affect insecticide-treated mosquito nets (ITN) use in Kenya, and show that there are important nonlinearities in the subsidy incidence. The issue of possible non-linearities in social effects are raised as a possibility in both and Kremer and Miguel (2007) but in neither study was there sufficient statistical power to reject linear specifications.…”

The Economics of Infectious Diseases

“…Kaier and Frank (2010) and Kaier (2012) ITNs and takes into account the benefits to non-users that live in the vicinity of users of ITNs (Cohen & Dupas, 2010). Bhattacharya, Dupas, and Kanaya (2013) found that when the indirect benefits of ITN subsidies to neighbors of users are ignored in cost-benefit analyses, ITN use is overestimated at lower and underestimated at higher subsidy rates. Cook et al (2009) show that if the optimal Pigouvian subsidy for Cholera vaccine is unknown, selling them at full marginal cost may, under some circumstances, be a preferable second-best option to providing them for free.…”