ANIMAL HEALTH SERVICES: FINDING THE BALANCE BETWEEN PUBLIC AND PRIVATE DELIVERY

Growing fiscal deficits and greater awareness of the huge economiccost of often-inefficient government activities have renewedinterest in transferring the delivery of important servicesfrom the public to the private sector in developing countries.This article, drawn from a longer study, offers a frameworkfor determining the appropriate roles of the public and privatesectors in delivering animal health services, such as veterinarysurveillance, disease vector control, vaccination, clinicaltreatment of sick animals, inspection of livestock products,and veterinary research and extension. The profitability and therefore the supply of private veterinaryservices is governed by several factors arising from economiesof scale, such as the size of the livestock enterprises in thelocality, the nature of potential or actual diseases, and thetypes of animals raised in the production systems. Thus, inareas where private veterinary work is unprofitable or whereother types of market failure occur, economic or social concernsmay make some type of public intervention necessary. The transferof animal health services from the public to the private sectormust be done selectively, and government support may be neededto ensure the success of such transfers.      

Public Social Spending in Africa: Do the Poor Benefit?

Education and health care are basic services essential in anyeffort to combat poverty and are often subsidized with publicfunds to help achieve that purpose. This paper examines theeffectiveness of public social spending on education and healthcare in several African countries and finds that these programsfavor not the poor, but those who are better-off. It concludesthat this targeting problem cannot be solved simply by adjustingthe subsidy program. The constraints that prevent the poor fromtaking advantage of these services must also be addressed ifthe public subsidies are to be effective.      

THE PUBLIC SUBSIDIZATION OF EDUCATION AND HEALTH IN DEVELOPING COUNTRIES: A Review of Equity and Efficiency

The public sector in developing countries has traditionallyplayed an important role in the financing of educational andhealth services. This review finds, however, that the shareof public subsidies in these two sectors is not progressive,that is, proportionately higher for individuals in the lowersocioeconomic groups. This distribution persists despite explicitpolicies of universal free provision in many countries. Thearticle argues that the extent and pattern of public spendingcontribute to underinvestment and to a misallocation of scarceresources within the education and health sectors.      

Weak Links in the Chain: A Diagnosis of Health Policy in Poor Countries

Recent empirical and theoretical literature sheds light on thedisappointing experience with implementation of primary healthcare programs in developing countries. This article focuseson the evidence showing two weak links in the chain betweengovernment spending for services to improve health and actualimprovements in health status. First, institutional capacityis a vital ingredient in providing effective services. Whenthis capacity is inadequate, health spending, even on the rightservices, may lead to little actual provision of services. Second,the net effect of government health services depends on theseverity of market failures—the more severe the marketfailures, the greater the potential for government servicesto have an impact. Evidence suggests that market failures arethe least severe for relatively inexpensive curative services,which often absorb the bulk of primary health care budgets.A companion paper, available from the authors (seep. 219), offersa perspective on how government funds can best be used to improvehealth and well-being in developing countries. It gives an alternativeview of appropriate public health policy, one that focuses onmitigating the characteristic market failures of the sectorand tailoring public health activities to the government's abilityto deliver various services.      

ECONOMIC ANALYSIS FOR HEALTH PROJECTS

This paper applies to the health sector a method of projectanalysis advocated recently by Devarajan, Squire, and Suthiwart-Narueput.A health project evaluation should establish a firm justificationfor public involvement; establish the counterfactual—whatwould happen with and without the project; and determine thefiscal effect of the project and the appropriate levels of feesin conjunction with project evaluation. The evaluation shouldalso acknowledge the fungibility of project resources and examinethe incentives both for high-level public servants to shiftgovernment resources away from project-funded activities tothose that have not been evaluated and for lower-level contractorsand civil servants to provide good or bad service. Market failuresin health services and insurance markets should serve as a startingpoint for economic analysis, not as a reason to ignore economicsin health projects. Project outputs should be predicted aftertaking into account the reaction of consumers and providersin the private sector as well as market structures of supply,demand, and equilibrium for health services.      

THE IMPACT OF AGRICULTURAL EXTENSION: THE TRAINING AND VISIT SYSTEM IN INDIA

This article reviews the rationale for public sector involvementin the dissemination of technological information to farmers,concluding that free markets do not fully satisfy farmers' informationneeds, and that government support is justified. Agriculturalextension is a principal way that governments can disseminateinformation, and the World Bank is financing many extensionprojects throughout the developing world. One specific approachto extension adopted in many Bank extension projects is theTraining and Visit (T&V) system. Data from a Bank-sponsoredsurvey in northwest India and from monitoring and evaluationreports issued by several Indian states are used in this articleto evaluate T&V extension operations and their impact. Extensionagents' interaction with farmers is found to be more intensiveand more significant as a source of information in areas coveredby T&V extension than in areas with a different extensionsystem. The yield levels of farmers whose main source of informationwas the T&V extension agent are also shown to be higher.In one case study, the incremental investment in T&V extensionis shown to be likely to generate at least a 15 to 20 percentrate of return.      

Cofinanced Public Extension in Nicaragua

How effective is agricultural extension? Is it worth the vastsums governments spend to provide it, mostly as a free service,to farmers worldwide? Relatively few studies exist that measureand compare the benefits of extension activities against theircosts. In the absence of such data, this pilot activity concentratedinstead on demand. Would demand for extension services be highif they were no longer free? The existence of solid demand wouldpresuppose some benefits from the service. Further, might chargingfor the service actually improve its quality and sustainability? The pilot program in Nicaragua described here set out to testwhether a truly demand—driven extension system aimed atfarmers with small-and medium-size holdings could be developed.The principal mechanism was a contribution by the farmer paidas a bonus to the extensionist: the aim was to introduce incentivesfor providers to improve the service through rewards linkedto the quality of their work and to establish direct accountabilityof extensionist to client. The outcomes showed that the cofinancingconcept can be successful. The article describes the design,implementation, and results in the expectation that the lessonslearned may be of interest elsewhere.      

THE IMPACT OF HEALTH AND NUTRITION ON EDUCATION

Child health and nutrition are strongly associated with educationalachievement. But associations do not necessarily indicate causality;estimates generally are likely to be biased in one directionor the other. As a result analysts and policymakers should havemuch less confidence in findings about the effect of healthon schooling success than has been claimed in previous surveys.The evidence is more nuanced and qualified than is often recognizedbut may still support the conclusion that health may have considerableeffects on postschooling productivity. Policy implications pointtoward providing public subsidies for the collection, analysis,and dissemination of information about the links between healthand education; and toward providing services to improve thehealth of poor children.      

MANAGEMENT OF PUBLIC INDUSTRIAL ENTERPRISES

This study indentifies the factors that influence the performanceof state industries.Based on a review of thirteen countries,the authours isolate three qualities in the business and managerialenvironment that distinguish successful public enterprises fromthe others. These are (a) the degree of competition that publicenterprises are exposed to; (b) the degree of financial autonomyand accountability under which public enterprises operater;and (c) the extent and manner in which managerial autonomy andaccountability are ensured. It is impossible, and perhaps misleading,to assess statistically the importance of each of these factors.Where all three exist, however, the performance of public enterprisesis significantly better than in those cases where most or allthese factors are absent.      

FINANCING INFRASTRUCTURE IN DEVELOPING COUNTRIES: LESSONS FROM THE RAILWAY AGE

In recent years suggestions for reforming the provision andfinancing of infrastructure services in developing countrieshave focused on private participation. This alternative to publicfinancing is seen as a way both to minimize the inefficienciesof public administration and to avoid the need for externalborrowing. In fact, for much of the nineteenth century, infrastructureprojects were privately financed and built. This approach, however,did not obviate the need for government intervention and foreigncapital. Because of the difficulties of assessing projects,investors were reluctant to commit their funds, and governmentsturned to subsidies and loan guarantees to encourage investment.Often, however, government intervention only replaced one setof problems with another. Investors with government-guaranteedloans had no incentive to monitor the firm's performance—alimitation that led to the diversion of funds and frustratedthe public interest. This article draws out the implicationsof this experience for policymakers in developing countriestoday.      

Weak Links in the Chain II: A Prescription for Health Policy in Poor Countries

In an earlier article, the authors outline some reasons forthe disappointingly small effects of primary health care programsand identified two weak links standing between spending andincreased health care. The first was the inability to translatepublic expenditure on health care into real services due toinherent difficulties of monitoring and controlling the behaviorof public employees. The second was the "crowding out" of privatemarkets for health care, markets that exist predominantly atthe primary health care level. This article presents an approach to public policy in healththat comes directly from the literature on public economics.It identifies two characteristic market failures in health.The first is the existence of large externalities in the controlof many infectious diseases that are mostly addressed by standardpublic health interventions. The second is the widespread breakdownof insurance markets that leave people exposed to catastrophicfinancial losses. Other essential considerations in settingpriorities in health are the degree to which policies addresspoverty and inequality and the practicality of implementingpolicies given limited administrative capacities. Prioritiesbased on these criteria tend to differ substantially from thosecommonly prescribed by the international community.      

Access to Financial Services: A Review of the Issues and Public Policy Objectives

This article reviews the evidence on the importance of financefor economic well-being. It provides data on the use of basicfinancial services by households and firms across a sample ofcountries, assesses the desirability of universal access, andprovides an overview of the macroeconomic, legal, and regulatoryobstacles to access. Despite the benefits of finance, the datashow that use of financial services is far from universal inmany countries, especially developing countries. Universal accessto financial services has not been a public policy objectivein most countries and would likely be difficult to achieve.Countries can, however, facilitate access to financial servicesby strengthening institutional infrastructure, liberalizingmarkets and facilitating greater competition, and encouraginginnovative use of know-how and technology. Government interventionsto directly broaden access to finance, however, are costly andfraught with risks, among others the risk of missing the targetedgroups. The article concludes with recommendations for globalactions aimed at improving data on access and use and suggestionson areas of further analysis to identify constraints to broadeningaccess.      

SHELTER STRATEGIES FOR THE URBAN POOR IN DEVELOPING COUNTRIES

Rapid growth in many developing-country cities is strainingthe capacity of their shelter delivery systems. Governmentshave chosen a variety of implicit and explicit policies to amelioratethese strains. However, these policies are not always consistentwith their objectives, often because of a lack of knowledgeof how housing markets actually work and how policies affectand are constrained by market behavior. This paper reviews recentresearch on housing market behavior in developing countries,including the demand for housing and the pattern of housinginvestment across countries, the financing of housing by low-incomehouseholds, and the willingness to pay for secure tenure. Commonhousing policies are then examined, including public housing,sites and services projects, and slum clearance versus upgrading.Rent controls, measures to improve the supply of finance andinfrastructure, and building codes and standards are also discussed.      

Public Intervention in Health Insurance Markets: Theory and Four Examples from Latin America

This article examines rationales for public intervention inhealth insurance markets from the perspective of public economics.It draws on the literature of organizational design to examinealternative public intervention strategies, including issuesof contracting, purchaser provider splits, and regulation ofcompetition. Health insurance reforms in four Latin Americancountries are then considered in light of the insights providedby the theoretical literature.      

How Research Can Assist Policy: The Case of Economic Reforms in Uganda

Research has had a powerful impact on policy in Uganda, affectingthe climate of opinion, improving the quality of the policydebate, and helping focus public policy and intervention onpoverty reduction. Uganda's successful use of knowledge andresearch to help set public policy priorities demonstrates thateven a poor postconflict country can, in a relatively shortperiod of time, create an effective information base and feedbackmechanisms for decisionmaking.      

Using Global Positioning Systems in Household Surveys for Better Economics and Better Policy

Distance and location are the important determinants of manychoices that economists study. Economists often rely on informationabout these variables that is self-reported by respondents insurveys, although information can sometimes be obtained fromsecondary sources. Self-reports are typically used for informationon distance from households or community centers to roads, markets,schools, clinics, and other public services. There is growingevidence that self-reported distance is measured with errorand that these errors are correlated with outcomes of interest.In contrast to self-reports, global positioning systems (GPS)can determine location within 15 m in most cases. The fallingcost of GPS receivers makes it increasingly feasible for fieldsurveys to use GPS to more accurately measure location and distance.This article reviews four ways that GPS can lead to better economicsand better policy by clarifying policy externalities and spillovers,by improving the understanding of access to services, by improvingthe collection of household survey data, and by providing datafor econometric modeling of the causal impact of policies. Severalpitfalls and unresolved problems with using GPS in householdsurveys are also discussed. JEL codes: C81, O12, R20     

ALTERNATIVE FORMS OF EXTERNAL FINANCE: A SURVEY

For many developing countries, alternative forms of externalfinance—all forms of finance that are not guaranteed byor mediated through the public sector—have become increasinglyimportant as traditional financing to the public sector hasebbed. Yet a survey of the literature reveals few recent analyticalinsights about alternative financing, which includes foreigndirect investment, project lending, portfolio investment, closed-endequity funds, private nonguaranteed debt, licensing, joint ventures,quasi-equity contracts, and other forms of private, nonrecourselending to private borrowers. The literature offers little solidguidance for distinguishing between alternative and traditionalfinancing with respect to country risk, for establishing themost appropriate and efficient incentive structures and restrictionsin the host country, or for identifying the optimal financingmodes for international firms investing in developing countries.This gap in the analytical literature has important implicationsfor policy formulation. It is not always clear whether a countryis developing incentives and establishing safeguards (for ensuringadherence to project performance requirements) that are mosteffective in attracting alternative forms of finance.      

HOUSEHOLD RESPONSES TO PUBLIC HEALTH SERVICES: COST AND QUALITY TRADEOFFS

The effectiveness of government investments in health care dependson the public's response to price and quality as well as onwhether these expenditures actually improve health outcomes.Consumers, even those in low-income households, are willingto pay fees for better health care if the fees translate intoimproved access and reliability. But when prices rise withouta concomitant improvement in services, malnutrition and childmortality rates increase. The availability of basic health carehas a relatively greater impact on households with low incomesor low education, or both, than does the provision of more specializedservices. This article describes the types of services for whichhouseholds indicate they are willing to pay increased fees.It also indicates the potential gains from improving these services,as well as the consequences of moving faster on cost recoverythan on providing improved or better-targeted services.      

Developing Countries' Changing Participation in World Trade

Recent years have seen substantial reductions in trade policyand other barriers inhibiting developing country participationin world trade. Lower barriers have contributed to a dramaticshift in the pattern of developing country trade—awayfrom dependence on commodity exports to much greater relianceon manufactures and services. In addition, exports to otherdeveloping countries have become much more important. Thesechanges have profound implications for the role played by developingcountries in the world economy and trade system.      

Democracy, Public Expenditures, and the Poor: Understanding Political Incentives for Providing Public Services

The incentives of politicians to provide broad public goodsand reduce poverty vary across countries. Even in democracies,politicians often have incentives to divert resources to politicalrents and private transfers that benefit a few citizens at theexpense of many. These distortions can be traced to imperfectionsin political markets that are greater in some countries thanin others. This article reviews the theory and evidence on theimpact on political incentives of incomplete information forvoters, the lack of credibility of political promises, and socialpolarization. The analysis has implications for policy and forreforms to improve public goods provision and reduce poverty.