Shanta Devarajan's blog
If user fees for health have been so vilified (including in comments on this blog), why are we bringing the subject up again? Because new evidence calls into question the prevailing view, namely that removing user fees leads to: (i) increased use of health services and hence to (ii) improved health outcomes. Confirming (i), the recent literature shows that (ii) does not always follow.
Raising the price of a good or service has two effects: it reduces demand and increases supply. In the case of user fees for health, it was thought that paying for a service also makes people use it more appropriately (you don’t go to the doctor for minor ailments) and value it more than if they obtained it for free.
IMF Chief Economist Olivier Blanchard created quite a stir at the recent American Economics Association Meetings when he presented his joint paper with Daniel Leigh that showed that, for 26 European countries, the fiscal multipliers—the amount by which output expands with an increase in the fiscal deficit—were considerably higher than previously thought. Whereas these multipliers were previously thought to be around 0.5, they find them to be above 1.0. Applying these figures to a reduction in the fiscal deficit (sometimes called “fiscal consolidation”), Olivier and Daniel suggest that people may have underestimated the extent to which European economies would contract in the wake of their fiscal consolidation.
Sudhir Anand and co-authors recently published a fascinating book, The Costs of Inaction, which looks at cost-benefit analysis in a different way. All cost-benefit analysis requires the analyst to specify a counterfactual—how the world would have evolved in the absence of the project of program. This is critical. An evaluation in Kenya included increased use of cellphones as an indicator of project success — neglecting the fact that cellphone use in neighboring villages was just as widespread.
In many cases, the counterfactual could be “doing nothing.” For a number of important areas such as health and education in Africa, The Costs of Inaction calculates the costs of doing nothing in terms of lives lost or under-educated children.
Most of the literature about Africa’s growth, “Africa Rising”, “Lions on the Move”, etc., refer to the present or the future. An oft-quoted World Bank report said, “Africa could be on the brink of an economic takeoff, much like China was 30 years ago and India 20 years ago.”
Meanwhile, Alwyn Young has recently published a paper that claims that per-capita consumption on the continent has been growing at 3.4-3.7 percent a year for the last two decades—about three to four times the growth rates documented in other studies. Instead of using national accounts data (which, as we know, suffer from several deficiencies), Alwyn adopts the Demographic and Health Surveys (DHS), which calculate the households’ ownership of assets and other indicators of well-being (ownership of a car or bicycle; material of the house floor; birth, death or illness of a child, etc.).
Patricio Marquez’s post correctly identifies lack of access to quality medicines as one of the constraints to poor people’s health in Africa. But the solutions he recommends—more public money for “essential drugs benefits”, building resilient institutions, and providing physicians with better scientific information and guidelines about drug prescriptions—are unlikely by themselves to improve poor people’s health outcomes.
More public money. Patricio notes that out-of-pocket expenditures are about 40 percent of total health expenditures and most of this is spent on outpatient drugs. He assumes the reason is that countries have not adopted a program of essential drugs benefits, and the reason for the latter is lack of public resources. But consider the following facts.
My colleague Jim Kim has launched a social media campaign on what it will take to end global poverty (please send your solutions via twitter to #ittakes.) I was reminded of a blog post I did about four years ago entitled “Ending poverty in Africa and elsewhere”.
My answer then and now is: Overcome government failure. By “government failure,” I don’t mean that governments are evil or even that they are incompetent or ill-intentioned. Analogous to “market failure,” government failure refers to a situation where the particular incentives in government lead to a situation that is worse than what was intended with the intervention.
For instance, governments finance and provide primary education so that poor children can have access to learning. But if teachers are paid regardless of whether they show up for work, and politicians rely on teachers to run their political campaigns, the result is absentee teachers and poor children who don’t know how to read or write—precisely the opposite of what was intended. We see similar government failures in health care, water supply, sanitation, electricity, transport, labor markets and trade policy.
Hardly a week goes by without someone pointing out that, despite being enrolled in school, many of Africa’s primary school-age children don’t seem to be learning very much.
Today’s salvo is from the Brookings Institution’s Center for Universal Education, whose Africa Learning Barometer estimates that 61 million children (half of the primary school-age population) “will reach their adolescent years without being able to read, write or perform basic numeracy tasks.”
Last week, my colleagues Elizabeth King and Ritva Reinikka called on Africa’s education system to “put learning first for all students.” We have documented disappointing learning outcomes in Tanzania on this blog. Despite being a middle-income country and having substantially increased public spending on education, South Africa’s performance in standardized tests is below the average for African countries.
Teachers in Tanzania are absent 23 percent of the time; doctors in Senegal spend an average of 39 minutes a day seeing patients; in Chad, 99 percent of non-wage public spending in health disappears before reaching the clinics.
These and other service delivery failures have been widely documented since the 2004 World Development Report, Making Services Work for Poor People.
But why do these failures persist? Because they represent a political equilibrium where politicians and service providers (teachers, doctors, bureaucrats) benefit from the status quo and will therefore resist attempts at improving services. For instance, teachers are often the campaign managers for local politicians. They work to get the politician elected, in return for which they get a job from which they can be absent. Powerful medical unions ensure that their members can work in the private sector and neglect their salaried government jobs. The losers are the poor, whose children don't learn to read and write, or get sick and die because the public clinic is empty.
Ever wonder how a World Bank flagship report gets written? A team of experts drafts an outline and shares it with stakeholders for their comments, suggestions and inputs. Based on this feedback, the team drafts the report and shares the draft for further comment, before publishing the final draft.
Today, we are proposing to write our flagship report on youth employment in Africa differently. We are launching a wiki platform and inviting the world to participate in the writing of the report. The wiki contains the preliminary outline which you can revise and rewrite. I emphasize that the outline is preliminary; it contains assertions that may not be borne out by further analysis (I know because I wrote some of them). So please add to, subtract from and edit the outline.
Why are we doing this? First, the topic of youth employment in Africa is so important that we need to engage as many people as possible in finding solutions. And second, young people are so tech-savvy that this may be a way of harnessing that talent and energy.
As you can imagine, the idea of writing a report on a wiki platform raised some questions, even from my teammates ("if you needed brain surgery, would you crowd source that too?"). But we decided that the benefits outweigh the risks.
And if we succeed in collaborating with a large number of people, we could call it the world's development report.