Abstract
Does providing information about a product influence the impact of price subsidies on purchases? This question is particularly relevant for health products in developing countries where both informational campaigns and price subsidies are common policy instruments. We conduct a field experiment in Zambia and find that providing information about a new version of a product significantly increases the impact of price subsidies on take-up. Taken alone, the information manipulation has no significant impact on demand while the price subsidy substantially increases demand. However, the evaluation of either intervention in isolation fails to capture the significant complementarity between the two.
Highlights
Governments and NGOs commonly use both informational campaigns and price subsidies in attempts to increase the use of health products and other socially beneficial technologies in developing countries (Hecht and Shah 2006, Nugent and Knaul 2006)
While our main focus will be on the interaction between information provision and price subsidies, we begin our analysis by examining the independent impact of each of these interventions
We find that the marginal impact of a price subsidy is greater if consumers are given information about the product
Summary
Governments and NGOs commonly use both informational campaigns and price subsidies in attempts to increase the use of health products and other socially beneficial technologies in developing countries (Hecht and Shah 2006, Nugent and Knaul 2006). Using door-to-door marketing in Lusaka, Zambia, we offered a new, unfamiliar water purification product for sale to 487 households, randomly varying both the price subsidy and the information about the product. We offered this unfamiliar target product alongside a familiar substitute. Our result is driven by consumers’ shift from the familiar product toward the target one, not by an overall increase in the demand for water purification. We find that the complementarity between two commonly used policy instruments, subsidies and information, can be quite large; in our setting, the impact of price subsidies is 60 percent greater among the informed households The magnitude of this point estimate highlights the potential importance of taking complementarities into account when designing policy interventions.
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