UC Berkeley

This dissertation explores empirically the role of government in addressing contemporary public health pressing issues. The first chapter studies the entrance of state-owned pharmacies to provide access to affordable pharmaceutical drugs. This is joint work with Juan Pablo Atal from University of Pennsylvania, José Ignacio Cuesta from Stanford University, and Felipe González from Queen Mary University of London. We find that public pharmacies sell the same drugs at a third of private pharmacy prices, because of stronger upstream bargaining and downstream market power in the private sector but are of lower quality. Leveraging the decentralized entry of public pharmacies to local markets in Chile, we show that public pharmacies induced market segmentation and price increases in the private sector, benefiting the switchers to the public option but harming the stayers. We conclude that the countrywide entry of public pharmacies would reduce yearly consumer drug expenditure and significantly outweigh the costs of the policy.

In the second chapter, in joint work with Pablo Muñoz from Universidad de Chile, we ask how governments can improve healthcare provision in public hospitals. To this end, we study a reform in Chile that aimed to improve public service provision by dramatically changing the way government institutions recruit high-ranking civil servants. We focus on the impact of the policy on public hospital performance and examine the underlying mechanisms through which public managers affect public health outcomes. The paper shows that the policy reduced hospital mortality around 8%, an effect that persisted after three years. We also find that the policy changed the pool of CEOs by displacing older doctors with no management training in favor of younger CEOs with either undergraduate degrees in management or doctors with master’s degrees or diplomas in management. We find that the reform affected hospital mortality mostly when newly appointed managers had management studies, who introduced more efficient use of medical resources and better personnel practices.

The third chapter studies an innovative nationwide policy that mandates the use of warning labels on products whose sugar or calorie concentration exceeds certain thresholds to address increasing obesity. The policy was first passed in Chile and has been widely replicated in several countries such as Argentina, Brazil, Canada, Mexico, Israel, among others. In a joint project with Nano Barahona and Sebastián Otero, both from UC Berkeley, we partnered with Walmart-Chile to study the effects of the policy Chile. We find that consumers substituted from labeled to unlabeled products, a pattern mostly driven by products that consumers mistakenly believe to be healthy. On the supply side, we document substantial reformulation of products and bunching at the thresholds. Next we develop and estimate an equilibrium model of demand for food and firms’ pricing and nutritional choices. The main finding is that that food labels increase consumer welfare, an effect that is enhanced by firms’ responses. We conclude that under optimal policy thresholds, food labels and sugar taxes generate similar gains in consumer welfare, but food labels benefit the poor relatively more.