Short-Run Subsidies and Long-Run Adoption of New Health Products: Evidence from a Field Experiment

Pascaline Dupas

No 16298, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Short-run subsidies for health products are common in poor countries. How do they affect long-run adoption? We present a model of technology adoption in which people learn about a technology's effectiveness by using it (or observing others using it) for some time, but people quit using it too early if they face higher-than-expected usage costs (e.g., side effects). The extent to which one-off subsidies increase experimentation, and thereby affect learning and long-run adoption, then depends on people's priors on these usage costs. One-off subsidies can also affect long-run adoption through reference-dependence: People might anchor around the subsidized price and be unwilling to pay more for the product later. We estimate these effects in a two-stage randomized field experiment in Kenya. We find that, for a new technology with a lower usage cost than the technology it replaces, short-run subsidies increase long-run adoption through experience and social learning effects. We find no evidence that people anchor around subsidized prices.

JEL-codes: C93 D12 H42 O33 (search for similar items in EconPapers)
Date: 2010-08
Note: CH
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Published as Pascaline Dupas, 2014. "ShortâRun Subsidies and LongâRun Adoption of New Health Products: Evidence From a Field Experiment," Econometrica, Econometric Society, vol. 82(1), pages 197-228, 01.

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Related works:
Journal Article: Short‐Run Subsidies and Long‐Run Adoption of New Health Products: Evidence From a Field Experiment (2014)
Working Paper: Short-Run Subsidies and Long-Run Adoption of New Health Products: Evidence from a Field Experiment (2010)
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