NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Does The Market Reward Quality?: Evidence from India

Zachary Wagner, Somalee Banerjee, Manoj Mohanan, Neeraj Sood

NBER Working Paper No. 26460
Issued in November 2019
NBER Program(s):Program on Children, Development Economics Program, Health Care Program, Health Economics Program

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.

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Document Object Identifier (DOI): 10.3386/w26460

 
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