Recognizing a good deal: Short-term subsidies and the dynamics of public service use

Abstract

I study the longer-run dynamics of household use of a public service in response to short-term subsidies. I exploit spatial variation in exposure to subsidies that induced households to use a publicly-provided matching platform for sanitation services in Dakar, Senegal. Using platform administrative data, I show that neighborhoods exposed to short-term subsidies are significantly more likely to use the platform after subsidies end, but this effect declines gradually to zero over time. Following a subsequent city-wide subsidy campaign two years later, increased use re-emerges in previously-subsidized neighborhoods before declining again. The pattern of decline and re-emergence shows that short-term subsidies can have persistent effects, but sustaining these effects may require repeated intervention.