Columbia International Affairs Online: Working Papers

CIAO DATE: 03/2009

Pricing and Access: Lessons from Randomized Evaluations in Education and Health

Alaka Holla, Michael Kremer

January 2009

Center for Global Development


This paper surveys evidence from recent randomized evaluations in developing countries on the impact of price on access to health and education. The debate on user fees has been contentious, but until recently much of the evidence was anecdotal. Randomized evaluations across a variety of settings suggest prices have a large impact on take-up of education and health products and services. While the sign of this effect is consistent with standard theories of human capital investment, a more detailed examination of the data suggests that it may be important to go beyond these models. There is some evidence for peer effects, which implies that for some goods the aggregate response to price will exceed the individual response. Time-inconsistent preferences could potentially help explain the apparently disproportionate effect of small short-run costs and benefits on decisions with long-run consequences.