Why do health facilities in developing countries do so poorly? This paper examines the role of financial constraints. I describe an experiment in which we surprised health workers in randomly selected public health clinics in Nigeria with a N600,000 grant paid out in installments over one year. Its administration was left entirely to health workers. I show that the award led to large productivity gains. Using expenditure data combined with novel textual data I provide an explanation for these effects. I show that the award increased investments in physical and human capital, led to lower prices for patients and inspired health workers to do better.

This paper describes the results of a policy experiment conducted in coordination with the Nigerian government. In this experiment, some communities were randomly selected to receive a new doctor. These doctors were posted to the public health center serving the community to work for a year. Prior to their arrival, health care was provided by mid-level health care providers (MLP). To separate the effect of (ostensibly higher) quality from that of quantity, another group of communities was provided with an additional mid-level health care worker. A third group of communities received no additional workers. No other inputs were provided. I find a measurable decrease in mortality in communities assigned a doctor but not in communities assigned an additional MLP, suggesting that quality in the health care sector is a significant constraint.