Estimating the Impact of Means-tested Subsidies under Treatment Externalities with Application to Anti-Malarial Bednets
AbstractRegular 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18833.
Date of creation: Feb 2013
Date of revision:
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- Debopam Bhattacharya & Pascaline Dupas & Shin Kanaya, 2013. "Estimating the Impact of Means-tested Subsidies under Treatment Externalities with Application to Anti-Malarial Bednets," CREATES Research Papers 2013-06, School of Economics and Management, University of Aarhus.
- Debopam Bhattacharya & Pascaline Dupas & Shin Kanaya, 2013. "Estimating the Impact of Means-tested Subsidies under Treatment Externalities with Application to Anti-Malarial Bednets," Economics Series Working Papers 646, University of Oxford, Department of Economics.
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H4 - Public Economics - - Publicly Provided Goods
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
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- Debopam Bhattacharya, 2013. "Nonparametric Welfare Analysis in Stochastic Models of Binary Choice," Economics Series Working Papers 669, University of Oxford, Department of Economics.
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