Cheaper and better? Explaining a newborn mortality advantage at public versus private hospitals in India.
Abstract: Public and private health care providers generally have different incentives, which may lead to different care and health outcomes. I study two large Indian states where high mortality rates make effects detectable and weak regulation allows provider incentives to operate without constraint. In these states, public (government-run) clinics and hospitals charge less for care and have poorer patients than private clinics and hospitals—yet, puzzlingly, births there survive at much higher rates. I show that these public facilities reduce the rate of newborn death by over 25 per thousand births, over half the rate of death for private-facility births. I use two complementary empirical strategies. First, to address selection, I estimate the slope of village neonatal mortality with respect to the public–private birth share; if facility type didn’t matter, and the observed differences were entirely due to selection, then this slope would be zero. Second, I estimate the spatial discontinuity in mortality at district borders, which exogenously shift public use for otherwise-similar nearby births. I present evidence that the mortality gap operates through interventions that follow separation of mothers and babies, a pattern consistent with pay-per-service incentives that reward additional procedures in private facilities. These results suggest that if private providers treated patients identically to public providers, they would prevent over 37,000 children’s deaths each year.