Ordeal Mechanisms and Training in the Provision of Subsidized Products in Developing Countries

• Development Workshop

Date and Location

Monday, November 17, 2014, 4:10 PM - 5:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

The cost-effectiveness of policies providing
welfare-enhancing products for free or at highly subsidized prices is
often compromised by the fact that many individuals do not use the
products provided. The cost-effectiveness of these distribution
programs can thus be improved by either targeting products to
individuals more likely to use the product being provided or by
increasing usage among those receiving the product. In this paper we
present the results of a field experiment testing two policy
instruments designed to improve the cost-effectiveness of a program to
distribute free eyeglasses to myopic children in rural China. We first
study how well an ordeal mechanism—imposing a non-monetary cost on
recipients to acquire a product—targets the provision of eyeglasses to
those who would use them and saves program resources by screening out
those who would not. Our second intervention aims to increase uptake
and usage by providing a training program on the benefits of
eyeglasses and addressing misinformation that contributes to low
levels of usage. We test how both of these approaches independently
and jointly affect the cost-effectiveness of the program and overall
usage of eyeglasses. Our results imply that both interventions improve
cost-effectiveness relative to pure free distribution without
compromising the primary policy goal of increasing overall usage.
Combining the two interventions, however, provides no additional
benefits in terms of cost-effectiveness or increasing usage relative
to either intervention alone.