Association for Public Policy Analysis & Management

In 1993, the Colombian government underwent a significant health care reform, creating a two‐tiered system based the population targeted and the funding sources. The subsidized regime (SR) aims the poorest households and is mostly publicly funded. The contributive regime (CR) is intended for formal workers and is funded through payroll taxes. Uninsured can only access to emergency services. Using data from the Colombian Living Standard Survey of 2008, I estimate the effect of the SR on a set of household-related food expenditure variables and food security status. The assumption is that the SR not only generates a substitution effect (more health care utilization), but also creates an income effect (more and better food consumption). Since eligibility to the SR is determined through a proxy means test, the corresponding score is subject to measurement error and manipulation, biasing the estimations from standard regression analysis. Thus, I conduct an instrumental variables approach to correct these issues.