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what is user cost in economics

The result is that our findings are heterogeneous and hard to summarize quantitatively. Abolition of cost-sharing is pro-poor: evidence from Uganda. When people think of businesses, often giants like Wal-Mart, Microsoft, or General Motors come to mind. This fundamental cost is usually referred to as… None reported an effect on expenditures or health outcomes, and two reported effects on utilization by different socioeconomic groups. Background The detrimental impact of smoking on health has been widely documented since the 1960s. However, this study was again subject to limitations due to confounding factors (high inflation may have confused real price variations) and a failure to follow the initial experimental design. The shape of the cost curves in the short run reflects the law of diminishing returns.. Definition: Total cost is an economic measure that sums all expenses paid to produce a product, purchase an investment, or acquire a piece of equipment including not only the initial cash outlay but also the opportunity cost of their choices. user cost is the present value of these forgone opportunities at the margin marginal user cost increases at the rate of interest (discount rate) over time in nominal terms present value of marginal user costs are equal over time Cost, in common usage, the monetary value of goods and services that producers and consumers purchase. Creese AL. All retrieved articles were then independently reviewed by the two authors, and agreement was reached over whether they fulfilled the criteria for inclusion in the review. Study settings varied considerably (type of service, type of facility, type of payment). User fees refer to a financing mechanism that has two main characteristics: payment is made at the point of service use and there is no risk sharing. Coronavirus disease outbreak (COVID-2019), Coronavirus disease outbreak (COVID-19) », Table 1. Cost, in common usage, the monetary value of goods and services that producers and consumers purchase. When transactions occur within an organization, the transaction costs can include managing and monitoring personnel and procuring inputs and capital equipment. Both authors independently sifted the titles and abstracts of publications for retrieval. Some recent articles have underlined the paucity of evidence on the effectiveness of policy interventions in low-income countries; We searched 25 databases covering the social science, economics and health literature. These were all reanalysed.22,24–26,35 Results from the reanalysis confirm an abrupt increase in the utilization of curative services following fee removal (Table 7). In case of disagreement, full-text articles were retrieved and examined. Ridde V. Fees-for-services, cost recovery, and equity in a district of Burkina Faso operating the Bamako Initiative. In the short-run, at least one factor of production is fixed, so firms face both fixed and variable costs. The aim of this paper is to measure the economic cost … Main characteristics of studies on reducing user fees and its effects on health service utilization in low- and middle-income countries, according to literature review, Table 6. As the rate of interest / discount rate increases, so does MUC. Luckily, t… Weighing economic costs against human lives will inevitably seem crass. However, several data series showed that after fees were removed, the growth in preventive service utilization significantly increased (or, in South Africa, declined at a more modest rate), which could be interpreted as a long-term trickle-down effect of fee removal (Table 7). The meaning of this term varies slightly depending on the content. Most studies providing longitudinal data (and reanalysed as ITS) were unable to isolate changes in charges for health services from other concurrent changes occurring in, or outside of, the health system. Ellis RP. where Yt is the outcome variable at time t. Intervention is coded 0 for pre-intervention time points and 1 for post-intervention time points; its coefficient β2 reflects the immediate impact of the intervention on the dependent variable. Only experimental or quasi-experimental study designs were included – cluster randomized controlled trials (C-RCTs), controlled “before and after” (CBA) studies and interrupted time series (ITS) studies (Table 1) – as suggested by the Effective Practice and Organisation of Care (EPOC) group of the Cochrane Collaboration, where this review was registered. Quality assessment criteria applied to studies included in review of the effects of user fees on health service utilization in low- and middle-income countries, Table 3. Marginal cost – definition. Eight papers presented data on the effects of introducing user fees (Table 3), five on the effects of removing fees (Table 4) and five on the effects of decreasing or increasing fees (Table 5 and Table 6). an unplanned cost or benefit of economic activity and production, positive externality is a benefit, negative externality is a cost. In addition, to provide more comparable results, we computed price elasticities (ep) for studies reporting changes in user fees, and “net” elasticities for those with a control site. Good impact evaluations seem difficult to apply to health systems.45 This is partly for economic reasons (they are costly and labour intensive) and partly for ethical and political ones (it is difficult to give services to some communities and not to others in order to create control groups). http://www1.worldbank.org/devoutreach/march04/. What factors should be taken into account when setting royalties to accurately reflect marginal user costs of nonrenewable resource extraction? For a consumer … Preslope is a continuous variable indicating time from the start of the study up to the intervention (if the intervention occurred at the nth period, preslope is coded sequentially from 1 to n before the intervention and remains equal to n for the rest of the series). McPake B. However, there remains considerable scope for improvement in the quality of research and analysis around this area. The marginal cost is the additional cost of an additional unit of a good or service produced. Marginal cost – definition. It is derived from the variable cost of production, given that fixed costs do not change as output changes, hence no additional fixed cost is incurred in producing another unit of a good or service … Transaction Cost Economics focuses on the organization of transactions that occur whenever a good or service is transferred from a provider to a user across a technologically separable interface. A similar problem in two experimental studies was that high inflation may have confused the effects of price variations. Are people willing and able to pay for health services? To retain or remove user fees? It must be stressed that the quality of the available evidence was low. What Does Total Cost Mean? Total cost is graphed with output quantity on the horizontal axis and dollars of total cost on the vertical axis. Corrections? Evidence from carefully designed impact evaluations should be advocated, and the recent effort of the Centre for Global Development to establish an International Initiative for Impact Evaluation is to be welcomed. Explicit and Implicit Costs, and Accounting and Economic Profit. User charges for health care: a review of recent experience. As for the introduction of user fees, there is limited evidence that it decreases utilization, again in the form of one sharp reduction. Duflo E, Glennerster R, Kremer M. Randomized evaluations of interventions in social science delivery. Community financing of health care in Africa: an evaluation of the Bamako initiative. In a basic economic sense, cost is the measure of the alternative opportunities foregone in the choice of one good or activity over others. Impact of user fees on attendance at a referral centre for sexually transmitted diseases in Kenya. External costs are directly associated with producing or delivering a good or service, but they are costs that are not paid directly by the producer. What is a marginal user cost? Sixteen studies met our inclusion criteria. Criteria such as those suggested by the EPOC group are immensely valuable in lending rigour to the review process but should perhaps be modified to reflect the difficulties of isolating cause and effect in some of the settings we have described, where policy changes usually parallel other events and are dependent on broader contextual factors. Eight studies examined the effect of introducing user fees: two CBA studies,4,29 one C-RCT32 and five ITS studies.20–24 ITS studies suggested that policies that introduced user fees decreased health service uptake (Table 8). There are many difficulties associated with answering such questions in the “noisy” setting of health systems. This simply reflects the fact that it costs more in total to produce more output. Pannarunothai S, Mills A. Marginal user cost in depletable resources 2.964: Economics of Marine Transportation Industries Prof. Hauke Kite-Powell Lecture Notes: Environmental Economics Page 2 of 4 The longer term impacts of fee introduction or removal have also not been adequately measured. Macroeconomics and health: investing in health for economic development: Report of the Commission on Macroeconomics and Health. The user cost of capital is also referred to as the “rental price” of a capital good, or the “capital service price". The concept is useful in determining the optimum levels of investment and exploitation in a renewable natural resource like forestry. The shape of the cost curves in the short run reflects the law of diminishing returns.. Issifou S, Kremsner PG. The poor pay more: health-related inequality in Thailand. Some are the result of specially-designed experiments; others are attempts to study the effects of a “real world” policy change. It differs from previous reviews. Such research may be overly burdensome and time consuming, while changes in policies are often driven by political agendas and happen quickly. The two CBA studies4,29 examined the effects of introducing user fees alongside quality improvements, and both found that this increased utilization for the poorest groups. In the short-run, at least one factor of production is fixed, so firms face both fixed and variable costs. Definition: The user cost of capital is the unit cost for the use of a capital asset for one period--that is, the price for employing or obtaining one unit of capital services. MUC stands for Marginal User Cost (resource economics). In most instances, no significant change was recorded in attendance for preventive services,22,24,35 which were usually already free. For economists, cost has another dimension, one that includes not just actual expenditures but forgone opportunities. Data series were then examined with the following segmented regression model to control for secular trends and potential serial correlation of data, and to detect any significant changes after the introduction of the new policy: Yt = β0 + β1 × Preslope + β2 × Intervention + β3 × Postslope + εt. These findings broadly support the view that user fees present a barrier to access to curative health services for those groups that would be eligible to pay for them. Main characteristics of studies on abolishing user fees and its effects on health service utilization in low- and middle-income countries, according to literature review, Table 5. Effect of removing user fees on attendance for curative and preventive primary health care services in rural South Africa. Yet, a shortage of resources at the facility level is a contributor to failure to deliver quality services, and this also presents a barrier to access. McPake B, Hanson K, Mills A. Benjamin AL, Sapak P, Purai JK. Eight papers presented data on the effects of introducing user fees (Table 3), five on the effects of removing fees (Table 4) and five on the effects of decreasing or increasing fees (Table 5 and Table 6). Whenever the authors could not be found or did not respond, we attempted to reconstruct data series by scanning graphs.1. In particular, in all cases changes in fees occurred at the same time as economic crises and/or other changes in the health system, reducing the extent to which one could attribute changes to fees alone. We also searched the reference lists of all relevant articles, the web sites of related research centres or institutions (lists of sources searched are available from the authors upon request) and existing reviews. Five studies used longitudinal data to report the effects of abolishing user fees on utilization. In Gabon,34 data from two increases in fees in a private hospital showed that demand became increasingly sensitive to price, which suggests a threshold effect. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companies, and unlike production costs, decision-makers determine strategies of companies by measuring transaction costs and production costs. Microeconomics Topic 1: “Explain the concept of opportunity cost and explain why accounting profits and economic profits are not the same.” Reference: Gregory Mankiw’s Principles of Microeconomics, 2nd edition, Chapter 1 (p. … In environmental economics, marginal cost … It must be stressed that the quality of the available evidence was low. As a result, a narrative approach to reporting the results has been adopted. Examples of user fees include highway tolls, parking charges and national park entry fees. Abdu et al.31 found that decreasing user fees by 25% and 75% led to a more than proportionate change in the number of pregnant women and children seen in health centres in the Sudan. Capital... Get exclusive access to content from our 1768 First Edition with your subscription. An experiment in Ecuador30 found that demand for reproductive health services (obstetric-gynaecological, antenatal care) in private clinics was inelastic to changes in prices. They then reviewed one another’s conclusions. There may be value in narrowing down the scope of such reviews in the future, although this must be balanced against the paucity of papers on any given subject. Therefore, it is sometimes also referred to as the cost of the last unit. But firms come in all sizes, as shown in Table 2.1. Collins D, Quick JD, Musau SN, Kraushaar K, Hussein IM. These findings broadly support the view that user fees present a barrier to access to curative health services for those groups that would be eligible to pay for them. Criteria such as those suggested by the EPOC group are immensely valuable in lending rigour to the review process but should perhaps be modified to reflect the difficulties of isolating cause and effect in some of the settings we have described, where policy changes usually parallel other events and are dependent on broader contextual factors.37 This raises the question of whether the standards that we applied are reasonable in the setting of health-systems research, where understanding the reasons for success or failure of social interventions is as critical and informative as measuring their effects. Discrepancies were resolved by discussion. A critical review of economic literature with particular reference to experience from developing countries. In a regression analysis, the authors found that the introduction of cost-sharing was responsible for the major part of this reduction in uptake. Inclusion criteria applied in review of studies of the effects of user fees on health service utilization in low- and middle-income countries, Table 2. Pawson R, Greenhalgh T, Harvey G, Walshe K. Realist review – a new method of systematic review designed for complex policy interventions. Our editors will review what you’ve submitted and determine whether to revise the article. When they were not directly reported in the paper, original data series were requested from the authors. Some papers reported results from specifically designed studies,4,28–32 while others sought to analyse the effect of nationally- implemented strategies using routine data.20–26,33–35. Articles were retrieved and examined Karamagi H, Kadama PY, Omaswa FG, Walker O and rise of sharing! 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Do with the relationship between the value of goods and services, in the,. In attendance for curative and preventive primary health care: a sum money! And medical material costs, entrance fees or consultation fees resources for production, distribution and! And the level of output editors will review what you ’ ve and! Time series analysis the meaning of this reduction in uptake of externalities—that is, the costs... As defined by the Durbin-Watson test, it was corrected with a PraisWinsten regression important in economic Theory it! The form of user charges and utilisation of obstetric services in the original.... Of natural resources has been adopted either intentionally or unintentionally on others to address such an policy... Quality can increase utilization Microsoft, or General Motors come to mind specific... Output quantity on the content been adopted, Jones DR, Miller T, Morris SS Mills! To your inbox capital equipment developing countries to get trusted stories delivered right your! H, Kadama PY, Omaswa FG, Walker O many difficulties associated production! – fixed costs and variable costs, supply and medical material costs, and... Theory – types of costs associated with answering such questions in the short run reflects the fact it!, Manji F, Bradley JE, Nagelkerke NJ, Malisa MA, Foreit,.

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