Barriers to the adoption and optimal use of savings and health technologies

Abstract

This thesis studies Kenyan households' use of savings accounts and malaria testing and treatment technologies. The first chapter studies whether or not married couples use savings accounts strategically. In the absence of commitment, the availability of a "private" savings technology (a device that is only accessible by a single owner) may incite individuals to take costly strategic savings action in order to manipulate the time path of consumption. This chapter presents a model that formalizes this idea and derives several testable theoretical implications. In particular, households where husbands and wives are well matched in terms of time preference should make greater use of joint (public) accounts, less use of individual (private) accounts, and make more efficient investment choices as compared to their poorly matched peers. The model informed the design of a field experiment where married couples in rural Kenya were given the opportunity to open joint and individual bank accounts at randomly assigned interest rates. The behavior of individuals in the experiment is inconsistent with ex-ante Pareto efficiency and a variety of alternative models of intrahousehold resource allocation, but consistent with the proposed model of strategic savings. Savings misallocation due to strategic behavior may be substantial: in the experiment poorly matched couples forgo at least 64 percent more interest than well matched couples. The second chapter studies the impact of reducing bank account transaction costs. Free ATM cards were offered to a randomly selected subset of newly opened formal bank accounts in Western Kenya. The ATM card reduced withdrawal fees by over 50 percent (from $0.78 to $0.38) and enabled account holders to make withdrawals from their accounts at any time of the day. The cards also enabled accounts to be accessed without the in-person verification of a national identity card. Targeting ATM cards to joint accounts and accounts owned by men substantially increased savings rates (by 39 percent) and average daily balances (by 16 percent) in the bank accounts. In contrast, the intervention had a negative impact when targeted to individual accounts owned by women. This gender difference appears to be driven by differences in bargaining power within the household: the positive treatment effect for men is concentrated in households where men have above median bargaining power, whereas the negative treatment effect for women is concentrated in households where women have below median bargaining power. The final chapter (co-authored with Jessica Cohen and Pascaline Dupas) uses data from a randomized controlled trial conducted with over 2,900 households in rural Kenya to study the tradeoffs between the affordability of effective antimalarials (ACTs) and overuse. We compare a 95-percent ACT subsidy (currently under consideration by the global health community) to an alternative policy regime that explicitly acknowledges the problem of overuse by providing access to a subsidized rapid diagnostic test for malaria (RDT) in tandem with subsidized ACTs. We find that ACT access increases by 60 percent in the presence of an ACT subsidy of 80 percent of more. Under the proposed 95-percent ACT subsidy, however, only 56 percent of those buying an ACT at the drug shop test positive for malaria. We show that targeting could be substantially increased (without compromising access) when the ACT subsidy is reduced to 80 percent but accompanied by an RDT subsidy.