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Abstract

We estimate the effects of higher quality healthcare usage on health, labor supply and schooling outcomes for sick individuals in Tanzania. Using exogenous variation in the cost of formal sector healthcare to predict treatment choice, we show that using better quality care improves health outcomes and changes the allocation of time amongst productive activities. In particular, sick adults who receive better quality care reallocate time from non-farm to farm labor, leaving total labor hours unchanged. Among sick children, school attendance significantly increases as a result of receiving higher quality healthcare, but labor allocations are unaffected. We interpret these results as evidence that healthcare has heterogeneous effects on marginal productivity across productive activities and household members.

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