what is user cost in economics

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 … The poor pay more: health-related inequality in Thailand. McDowall D, McCleary R, Meidinger E, Hay R. Ojeda G, Murad R, Leon F, Williams T. Testing pricing payment systems to improve access and cost-recovery from Norplant. A particular weakness was that only two studies looked at differential impact across population groups.4,29 Most studies on routine data could not assess the equity impact of the reforms described. Some have argued that user charges can generate vital resources at the local level and help provide good quality services;3–5 others have highlighted their negative effects, particularly on equity;6–9 Recently, several international campaigns have advocated the removal of user fees, especially for primary care services.1,10. As an example, to go for a walk may not have any financial costs imbedded to it. In the short-run, at least one factor of production is fixed, so firms face both fixed and variable costs. We also computed the statistical significance of the observed effects if it was not reported in the original paper. Impact of user fees on attendance at a referral centre for sexually transmitted diseases in Kenya. However, the quality of the data from which these conclusions were drawn was judged to be low due to the presence of confounding factors (concurrent policy changes), the questionable quality of routine data or small sample sizes. 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. Bulletin of the World Health Organization. Sepehri A, Chernomas R. Are user charges efficiency- and equity-enhancing? Another consideration involves the cost of externalities—that is, the costs that are imposed either intentionally or unintentionally on others. Marginal cost is defined as the cost incurred by producing one more unit of a product or service. Hutton G. Is the jury still out on the impact of user fees in Africa? 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 once production has already started. 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. Burnham GM, Pariyo G, Galiwango E, Wabwire-Mangen F. Discontinuation of cost sharing in Uganda. Five studies used longitudinal data to report the effects of abolishing user fees on utilization. These were all reanalysed. It is unclear from any study if this effect extends beyond this initial drop. One study32 was found to be of good quality, while all others were potentially biased. Capital... Get exclusive access to content from our 1768 First Edition with your subscription. Pannarunothai S, Mills A. One study. Discuss the 2 main branches of neoclassical economics that deal with environmental and resource issues. a)Marginal User Cost- when resources are scarce greater current use diminishes future opportunities, the marginal user cost is the present value o view the full answer Previous question Next question Get more help from Chegg Russell S. Illuminating cases: understanding the economic burden of illness through case study household research. MUC stands for Marginal User Cost (resource economics). 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). Benjamin AL, Sapak P, Purai JK. The fall and rise of cost sharing in Kenya: the impact of phased implementation. User fees can entail any combination of drug costs, supply and medical material costs, entrance fees or consultation fees. 1 provides more details on the search strategy). Evidence from two studies28,31 on the effect of decreasing fees suggested an increase in utilization (Table 9). 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. Key questions include the effects of fee changes on the quality of care, drug use and health worker motivation as well as utilization. Quality criteria were adapted from those suggested by the EPOC group of the Cochrane Collaboration (Table 2). What can be done? Postslope is coded 0 up to the last point before the intervention phase and coded sequentially from 1 thereafter. When they were not directly reported in the paper, original data series were requested from the authors. Luckily, t… lobby for policy-makers and donors to design prospective evaluations before rolling out national policy changes, such as introducing or removing user fees; use appropriate statistical and econometric methods to analyse data; combine quantitative analysis of effect with qualitative information describing context and implementation issues; seek to measure the equity effect of changes in charging policy. an unplanned cost or benefit of economic activity and production, positive externality is a benefit, negative externality is a cost. We only found studies reporting effects on health service utilization. Economics 230a Fall 2011 Derivation of the User Cost of Capital Consider a firm wishing to maximize its value at date t, (1) t s r s t V t e X ds ( ), where r is the discount rate that applies to the corporation’s real activities and X s is the firm’s cash flow at date s from these activities, (2) X p F K q I k D s u q u I u du s You have 1 free answer left. When a study presented unsatisfactory or unclear elements for two or more criteria, it was scored as being of “low” quality. This simply reflects the fact that it costs more in total to produce more output. This review is the first attempt to systematically assess the quality of existing evidence on the subject of charging for health services in low-income countries. Here, costs include imputed value of the entrepreneur’s own resources and services, as well as the salary of the owner-manager. Unit economics is defined as the “direct revenues and costs associated with a particular business model, and are specifically expressed on a per unit basis”. Unlock answer. As for the introduction of user fees, there is limited evidence that it decreases utilization, again in the form of one sharp reduction. Our editors will review what you’ve submitted and determine whether to revise the article. This fundamental cost is usually referred to as… The aim of this paper is to measure the economic cost … The revenue generating potential of user fees in Kenyan government health facilities. Good impact evaluations seem difficult to apply to health systems. The costs of providing mass transportation services are of two types, capital and operating. In the short-run, at least one factor of production is fixed, so firms face both fixed and variable costs. But in economics, cost is used in a broader sense. 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. Two studies suggested that the combination of user fees and improvements in quality can increase utilization. Effect of removing user fees on attendance for curative and preventive primary health care services in rural South Africa. Capital...…, However much of a commodity a business firm produces, it endeavours to produce it as cheaply as possible....…, The first is cost—of far greater importance in industrial, large-scale synthesis than in laboratory work...…. To redress this imbalance, this review set out to assess the quality of the existing evidence on the impact of user fees on health service utilization, household expenditures and health outcomes in low- and middle-income countries. 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. Cost, in common usage, the monetary value of goods and services that producers and consumers purchase. O’Donnell O, van Doorslaer E, Rannan-Eliya R, Somanathan A, Adhikari SR, Harbianto D, et al. We found several studies that had longitudinal data on utilization but had not performed a time series analysis.20–26 To be able to include these, we relaxed the original definition of ITS27 (Table 1) and set out to reanalyse the data appropriately. A similar problem in two experimental studies was that high inflation may have confused the effects of price variations.28,30 A key problem for the CBA studies was non-equivalence between control and intervention sites (Table 3 and Table 4). When auto-correlation was detected by the Durbin-Watson test, it was corrected with a PraisWinsten regression. Despite a sizeable literature published on this issue and some vigorous debate spanning several decades, there is still a scarcity of good quality evidence. Weighing economic costs against human lives will inevitably seem crass. 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. An initial sift of titles and abstracts led to the inclusion of 243 documents for further investigation (Fig. 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.11 In the meantime, several simple steps can be taken by researchers to improve the quality of research and evidence in this area: Funding: This work was funded by the Bill & Melinda Gates Foundation. Asked on 11 Jan 2018 OC2735262. 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). When resources are scarce, greater current use diminishes future opportunities. This simply reflects the fact that it costs more in total to produce more output. Cost Theory – Types of Costs These quality shortcomings, in combination with such a limited number of studies on each topic, mean that many questions remain. 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. For each included study, both authors extracted data and assessed quality. The shape of the cost curves in the short run reflects the law of diminishing returns.. Present Value of MUC are equal over time. Ellis RP. The concept is useful in determining the optimum levels of investment and exploitation in a renewable natural resource like forestry. Studies also covered both public- and private-sector charges. The development of the concept of user cost has been traced and its application in the economics of natural resources has been shown. 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 Bratt JH, Weaver MA, Foreit J, De Vargas T, Janowitz B. The user cost of capital is also referred to as the “rental price” of a capital good, or the “capital service price". James CD, Hanson K, McPake B, Balabanova D, Gwatkin D, Hopwood I, et al., et al. Yoder RA. 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. 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. Reflections on the current debate in low- and middle-income countries. Numerous studies have also quantified the economic cost that smoking imposes on society. 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. There is some limited evidence from the papers reviewed to suggest that removing user fees increases the utilization of curative health-care services, usually in the form of one sharp step-up following fee removal. However, both studies also had significant weaknesses in terms of design and analysis. 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. The impact of price changes on demand for family planning and reproductive health services in Ecuador. 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. 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. The question of which patients increase or decrease their utilization of health services, and for what health conditions, is also almost totally unanswered. increasing in quantity). Thus, the MARGINAL USER COST = Present Value of forgone opportunities at the margin. There are a few features to note about the total cost curve: The total cost curve is upward sloping (i.e. Thus, if you are attending any economics classes, youll most likely have to to calculate marginal cost at some point. At present, the magnitude and heat of the debate over user fees are not matched by efforts to strengthen the evidence base on the topic. In the Cost Theory, there are two types of costs associated with production – Fixed Costs and Variable Costs. However, these studies have mostly been in high income countries, with limited documentation from developing countries. Some papers reported results from specifically designed studies. Lavis J, Davies H, Oxman A, Denis JL, Golden-Biddle K, Ferlie E. Towards systematic reviews that inform health care management and policy-making. Marginal User Cost - when resources are scarce greater current use diminishes future opportunities, the marginal 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 A critical perspective. Using the marginal benefits / marginal costs per … This study again has several methodological limitations.31 Ojeda et al.28 reported that decreasing the price of intrauterine devices in Colombia led to an increase in the number of users and indicated a highly sensitive price elasticity of demand. This fundamental cost is usually referred to as opportunity cost. This review aimed to assess the effect on health service utilization of introducing, removing, increasing or decreasing user fees in low- and middle-income countries. 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