Three essays on the economics of health and *development

This dissertation has three chapters on the economics of health and development. The first chapter investigates how profit incentives established by public policy affect innovation. I study the impact of the Orphan Drug Act (ODA), which created incentives to develop drugs to treat rare diseases. I exploit variation in rare status across diseases and within diseases over time in a difference-in-difference approach. I find that the ODA increased the flow of new clinical drug trials for rare diseases. I also find that the ODA generated innovation in an unintended dimension: the development of drugs to treat “new” rare diseases defined by subdividing long-recognized diseases. I present a model that generates several testable predictions to determine the extent that subdividing represents better drug targeting or artificial partitioning of non-rare diseases in order to qualify for ODA benefits—a behavior called “balkanization”. I estimate that 17-percent of new clinical trials generated by the ODA represent balkanization.;The second chapter investigates whether variation in the levels of resources used by physicians represents variation in the efficiency of physician practices. I use data on heart failure and chronic obstructive pulmonary disease cases at five US hospitals to test whether patients of high resource-use physicians achieve better or worse health outcomes than others. I employ a split-sample strategy to eliminate the confounding effect of unobserved patient characteristics correlated with resource-use and health outcomes. I find that physicians who use more resources than average in one sample period are associated with second-sample patient outcomes that are worse than less resource-intensive physicians. Evidence suggests that medical training, experience and skill depreciation are factors in the diffusion process of efficient physician practices.;In chapter three, we designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. We test whether present-biased discounters are disproportionately more likely to take-up this product; and then test whether this product increases savings. Women who exhibited present-biased discounting were indeed more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percent for the treatment group relative to the control group.