Causes Of Underinvestment in Preventative Healthcare

Question 1

What can we say about the demand for preventative healthcare?

Answer 1

Low and price elastic - once free, then made chargeable, demand falls a lot

Question 2

Half a milllion children under 5 died from diarrhea in 2015
90% couldve been prevented by rehydration salts, which were so cheap!!!

another study shows bednets reduce malaria risk by 30%, and find child malaria free earns 50% more per average!
bednets were cheap as well

So why dont they invest in prevention??? 3 questions to ask

Answer 2

Do the poor care about health?

Do they know the returns to these technologies e.g bednets, rehydration salts???

Do they have the money?

Question 3

Do the poor care about health? 2 exhibits proving yes!

Answer 3

1. They spend a lot of money on treatment. Average poor household spends 6% of budget on health in India, 8% in catastrophic health events!
2. Health is the primary source (44%) of stress/anxiety. So they do care!!

Question 4

2nd question: Do they know the returns to the technologies? What do agents do as a result?

Answer 4

No. They lack information on causes of their poor health, and the returns to the technologies.

So instead of a formal diagnosis, they self-diagnose and treat thenselves for the wrong illness (e.g assume they have a fever!)

Question 5

Do they know the returns to the technologies?

3 exhibits of information provision having large impacts

Answer 5

Bangladesh - arsenic wells> they changed water source

India - people were informed their water source had E Coli> they used bleach to purify

Dupas - girls informed that HIV rates are higher in older men> reduced teen pregnancy from older men

Question 6

Going back to the point of self-diagnosis instead of formal diagnosis so treat themselves for the wrong illness.

How many of self diagnosed malaria patients actually had malaria

Answer 6

Only 37% actually had malaria!!

so couldve used wrong treatment and made their illness even worse! also wasted money, further issues!

Question 7

3rd question: Do they have the money? Are they liquidity constrained?

2 experiments on credit

Answer 7

Yes - they are liquidity constrained.

1. When poor get access to credit, investments increase considerably.

Tarozzi - given chance to buy bednet on credit, it increased purchased

Devoto - chance to buy water supply at HOME on credit, 69% take up compared to 10% in control (no credit)

Question 8

Caveat to credit

Answer 8

Credit was successful for specific health products (as shown in Tarozzi and Devoto) , but ineffective if credit is general/unconditional

(Like in education: unconditional CT wasn’t effective

Question 9

So why cant they slowly save for these technologies?

Answer 9

Lack of access to saving tools - few bank accounts

Saving at home often has negative returns

Behavioural constraints e.g present bias - hard to save

Question 10

Savings at home often has negative returns: examples of how (2)

Answer 10

Theft
Pressure to share with relatives (Riley)