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Does The Market Reward Quality?: Evidence from India

Author

Listed:
  • Zachary Wagner
  • Somalee Banerjee
  • Manoj Mohanan
  • Neeraj Sood

Abstract

There are two salient facts about health care in low and middle-income countries; 1) the private sector plays an important role and 2) the care provided is often of poor quality. Despite these facts we know little about what drives quality of care in the private sector and why patients continue to seek care from poor quality providers. We use two field studies in India that provide unique insight into this issue. First, we use a discrete choice experiment to show that patients are willing to pay higher prices for better technical quality (defined by correct treatment and correct diagnosis). Second, we use standardized patients to show that private providers who provide better technical quality are not able to charge higher prices. Instead providers are able to charge higher prices for elements of quality that the patient can observe (good patient interactions and more effort), which are less important for health outcomes. Taken together, this research highlights a market inefficiency and suggests that engaging patients with accessible information on technical quality of the providers in their community could shift demand to providers that provide better care and thus improve health outcomes.

Suggested Citation

  • Zachary Wagner & Somalee Banerjee & Manoj Mohanan & Neeraj Sood, 2019. "Does The Market Reward Quality?: Evidence from India," NBER Working Papers 26460, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26460
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • I1 - Health, Education, and Welfare - - Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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