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Does The Market Reward Quality?: Evidence from India

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  • 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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    References listed on IDEAS

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    1. Zachary Wagner & John Bosco Asiimwe & William H Dow & David I Levine, 2019. "The role of price and convenience in use of oral rehydration salts to treat child diarrhea: A cluster randomized trial in Uganda," PLOS Medicine, Public Library of Science, vol. 16(1), pages 1-18, January.
    2. Sima Berendes & Peter Heywood & Sandy Oliver & Paul Garner, 2011. "Quality of Private and Public Ambulatory Health Care in Low and Middle Income Countries: Systematic Review of Comparative Studies," PLOS Medicine, Public Library of Science, vol. 8(4), pages 1-10, April.
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    5. Kremer, Michael & Glennerster, Rachel, 2011. "Improving Health in Developing Countries," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 201-315, Elsevier.
    6. Jin, Ginger Zhe & Leslie, Phillip, 2005. "The Case in Support of Restaurant Hygiene Grade Cards," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 20(2), pages 1-6.
    7. Sanjay Basu & Jason Andrews & Sandeep Kishore & Rajesh Panjabi & David Stuckler, 2012. "Comparative Performance of Private and Public Healthcare Systems in Low- and Middle-Income Countries: A Systematic Review," PLOS Medicine, Public Library of Science, vol. 9(6), pages 1-14, June.
    8. Jishnu Das & Jeffrey Hammer & Kenneth Leonard, 2008. "The Quality of Medical Advice in Low-Income Countries," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 93-114, Spring.
    9. Jishnu Das & Alaka Holla & Aakash Mohpal & Karthik Muralidharan, 2016. "Quality and Accountability in Health Care Delivery: Audit-Study Evidence from Primary Care in India," American Economic Review, American Economic Association, vol. 106(12), pages 3765-3799, December.
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    1. Kai Shen Lim & Wei Aun Yap & Winnie Yip, 2022. "Consumer choice and public‐private providers: The role of perceived prices," Health Economics, John Wiley & Sons, Ltd., vol. 31(9), pages 1898-1925, September.
    2. He, Daixin & Lu, Fangwen & Yang, Jianan, 2023. "Impact of self- or social-regarding health messages: Experimental evidence based on antibiotics purchases," Journal of Development Economics, Elsevier, vol. 163(C).

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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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