Price Subsidies, Diagnostic Tests, and Targeting of Malaria Treatment: Evidence from a Randomized Controlled Trial

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Both under- and over-treatment of communicable diseases are public bads. But efforts to decrease one run the risk of increasing the other. Using rich experimental data on household treatment-seeking behavior in Kenya, we study the implications of this tradeoff for subsidising life-saving antimalarials sold over-the-counter at retail drug outlets. We show that a very high subsidy (such as the one under consideration by the international community) dramatically increases access, but nearly half of subsidised pills go to patients without malaria. We study two ways to better target subsidised drugs: reducing the subsidy level and introducing rapid malaria tests over-the-counter.

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