What Works in Fighting Diarrheal Diseases in Developing Countries? A Critical Review

The Millennium Development Goals call for reducing by half theproportion of people without sustainable access to safe drinkingwater. This goal was adopted in large part because clean waterwas seen as critical to fighting diarrheal disease, which kills2 million children annually. There is compelling evidence thatprovision of piped water and sanitation can substantially reducechild mortality. However, in dispersed rural settlements, providingcomplete piped water and sanitation infrastructure to householdsis expensive. Many poor countries have therefore focused insteadon providing community-level water infrastructure, such as wells.Various traditional child health interventions have been shownto be effective in fighting diarrhea. Among environmental interventions,handwashing and point-of-use water treatment both reduce diarrhea,although more needs to be learned about ways to encourage householdsto take up these behavior changes. In contrast, there is littleevidence that providing community-level rural water infrastructuresubstantially reduces diarrheal disease or that this infrastructurecan be effectively maintained. Investments in communal waterinfrastructure short of piped water may serve other needs, andmay reduce diarrhea in particular circumstances, but the casefor prioritizing communal infrastructure provision needs tobe made rather than assumed. JEL codes: Q56, Q52, O22     

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.      

Between the State and the Market: Can Informal Insurance Patch the Safety Net?

Most households in low-income countries deal with economic hardshipsthrough informal insurance arrangements between individualsand communities rather than through publicly managed programsor market-provided insurance schemes. Households may, for example,draw on savings, sell physical assets, rely on reciprocal giftexchanges, or diversify into alternative income-generating activities.These mechanisms can be highly effective in the right circumstances,but most recent studies show that informal insurance arrangementsare often weak. Poor households, in particular, have substantialdifficulties coping with even local, idiosyncratic risks. Publicpolicy can help reduce vulnerability by encouraging private,flexible coping mechanisms while discouraging those that arefragile or that hinder economic and social mobility. Promisingpolicies include creating self-regulating workfare programsand providing a supportive setting for institutions workingto improve access to credit, crop and health insurance, andsafe and convenient saving opportunities.      

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.      

ACHIEVING SOCIAL OBJECTIVES THROUGH PRIVATE TRANSFERS: A Review

Private interhousehold cash transfers are an important sourceof income in many developing countries. Among the countrieswhose experience is reviewed in the article, the proportionof all households receiving private transfers ranges from afifth to a half. The amounts received are large, particularlywhen compared with the incomes of the poorest households. Understanding more about these transfers is important for designingpolicy because, among other things, these remittances providesocial and economic benefits similar to those of public programs,such as unemployment insurance, pension support, educationalcredit, and health assistance. As such, private transfers maysupplement or overlap with public transfers, and, if privatedonors give less as public transfers increase, the effect ofpublic programs on beneficiaries would be less than originallyintended. Or the transfers may alter the distributional effectsof public programs: for again, if private donors give less aspublic transfers increase, they share in some of the benefitsof public programs.      

IMF Conditionality and Country Ownership of Adjustment Programs

This article uses finance and agency theory to establish twokey propositions about International Monetary Fund (IMF) conditionalityand country ownership of IMF-supported adjustment programs.First, the authors propose that the conditionality attachedto these programs is justified. Second, the article hypothesizesthat country ownership of these programs is crucial for theirsuccess. Because IMF conditionality and country ownership areboth necessary, the challenge is designing conditionality thatmaximizes ownership while providing adequate safeguards forIMF lending. The article analyzes several recent proposals aimedat enhancing country ownership of policies contained in IMF-supportedprograms. These proposals include encouraging countries to designtheir own adjustment and reform programs, streamlining structuralconditionality, introducing flexibility in the timing of structuralpolicy measures (floating tranche conditionality), and applyingconditionality to outcomes rather than policies (outcomes-basedconditionality).      

Appraising Workfare

Workfare programs aim to reduce poverty by providing low-wagework to those who need it. They are often turned to in a crisis.This article offers some simple analytical tools that can beused to rapidly appraise the cost-effectiveness of an existingworkfare operation as a basis for deciding whether the programshould be expanded. For pedagogic purposes, two stylized versionsof a range of programs found in practice are analyzed: one fora middle-income country, the other for a low-income country.The cost of a given gain to the poor is about the same for bothprograms, although the components of that cost are very different,with implications for the timing of benefits. The author pointsto program design changes that could enhance the impact on poverty.      

Targeting Revisited

Public spending programs aimed at alleviating poverty can eitherbe broadly targeted at categories ofspending or narrowly targetedat types of people. Each approach has benefits and costs tothe poor. It is often claimed that narrow targeting of the poorwill allow governments to reduce pQverty more effectively andat lower cost. But narrow targeting often has hidden costs,and once these costs are considered, the most finely targetedpolicy may not have any more effect on poverty than a broadlytargeted one. Both approaches also have hidden benefits, althoughless is known about their impact. Targeting can help, but itis not a cure-all. Reducing poverty calls for broadly targetedsocial sector spending combined with narrower targeting of cashand in-kind transfers to spec groups. It is also important forgovernments to experiment with schemes that offer better incentives,to carefully monitor the costs and outcomes, and to be flexibleand pragmatic in their policy responses.      

INTERPRETING RECENT RESEARCH ON SCHOOLING IN DEVELOPING COUNTRIES

Policymakers in developing countries have long been troubledby the undesirable, but apparently unavoidable, choice betweenproviding broad access to education and developing high-qualityschools. Recent evidence, however, suggests that this is a badway to think about human capital development. Grade repetitionand high dropout rates lead to a significant waste of resourcesin many school systems. Students in quality schools, however,respond in ways that reduce such inefficiencies, perhaps evensufficiently to recoup immediately investments in quality. Promoting high-quality schools, however, is more difficult thanmany have thought, in part because research demonstrates thatthe traditional approach to providing quality—simply providingmore inputs—is frequently ineffective. Existing inefficienciesare likely to be alleviated only by the introduction of substantiallystronger performance incentives in schools and by more extensiveexperimentation and evaluation of educational programs and schoolorganizations. Incentives, decentralized decisionmaking, andevaluation are alien terms to education, in both industrialand developing countries, but they hold the key to improvementthat has eluded policymakers pursuing traditional practices.      

DUMPING AND ANTIDUMPING: THE RHETORIC AND THE REALITY OF PROTECTION IN INDUSTRIAL COUNTRIES

A wide gap separates the rhetoric from the reality of protectionin industrial countries. Antidumping is the current realityof that protection. Protectionist interests stretch the definitionof dumping as far as they may to shelter actions against importsunder the antidumping umbrella. This article is about antidumping, in particular about the historyof antidumping regulation and its evolution under the GATT systeminto a major instrument of protection. The thesis is straightforward:antidumping is the fox put in charge of the henhouse—ordinaryprotection with a good public relations program. There is littlein its history to suggest that the scope of antidumping wasever more particular than protecting home producers from importcompetition, and there is much to suggest that such protectionwas its intended scope. The article has three sections. The first looks into the originsof antidumping regulation, the second examines contemporaryregulation (antidumping under the GATT), and the third summarizesthe significance of the first two.      

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.      

Insights on Development from the Economics of Happiness

The literature on the economics of happiness in developed economiesfinds discrepancies between reported measures of well-beingand income measures. One is the so-called Easterlin paradox:that average happiness levels do not increase as countries growwealthier. This article explores how that paradox—andsurvey research on reported well-being in general—canprovide insights into the gaps between standard measures ofeconomic development and individual assessments of welfare.Analysis of research on reported well-being in Latin Americaand Russia finds notable discrepancies between respondents’assessments of their own well-being and income- or expenditure-basedmeasures. Accepting a wide margin for error in both types ofmeasures, the article posits that taking such discrepanciesinto account may improve the understanding of development outcomesby providing a broader view on well-being than do income- orexpenditure-based measures alone. It suggests particular areaswhere research on reported well-being has the most potentialto contribute. Yet the article also notes that some interpretationsof happiness research—psychologists’ set point theory,in particular—may be quite limited in their applicationto development questions and cautions against the direct translationof results of happiness surveys into policy recommendations.      

Judicial Reform and Economic Development: A Survey of the Issues

Acknowledging the importance of sound judicial systems to goodgovernance and economic growth, the World Bank and several otherdonor organizations have funded judicial reform projects inmore than two dozen developing countries and transition economiesduring the past few years. Yet little is known about the actualeffect of judicial reform on economic performance or even aboutwhat elements constitute a sound reform project. This articlesurveys a wide range of current studies on judicial reform andfinds some surprising results.      

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.      

Managing Government Exposure to Private Infrastructure Risks

The privatization of infrastructure should lead to the developmentof new infrastructure, improvements in the operation of existinginfrastructure, and a reduction in budgetary subsidies. Whethercountries reap the full benefits of privatization, however,depends on how risks are allocated. If, as is often the casein developing countries, governments assume risks that shouldbe borne by investors, they may reduce incentives for efficiencyand incur significant liabilities. To solve these problems,governments need to improve their policies and restrict theirrisk bearing to certain political and regulatory risks overwhich they have direct control. When a government provides guarantees,it should attempt to measure their cost and improve the waythey are handled in the accounts and budgets. Measurement andbudgeting are critical to improving decisions about the provisionof guarantees, to improving project selection and contract design,and to protecting governments from unknowingly entering intocommitments that might jeopardize future budgets.      

WHEN DO HETERODOX STABILIZATION PROGRAMS WORK?: Lessons from Experience

What advantages and disadvantages does the heterodox strategyoffer to stabilization programs in countries with chronic highinflation? Heterodox stabilization programs, in our definition,are those that support orthodox policies— that is, tightfiscal policy and a fixed exchange rate—with the initial,temporary use of incomes policies— that is, price andwage controls. This evaluation, based on several heterodox programs,successful and unsuccessful, from the 1960s and 1980s in LatinAmerican countries and Israel, affords four principal lessons: * The rapid reduction in inflation at the beginning of heterodoxprograms (which usually comes about at small cost) is the easypart; the problem is to maintain price stability over time. * Incomes policies in heterodox stabilization programs are justifiedonly in countries with high chronic inflation, where persistentinflation is more pervasive and problematic. * There is a case for a bigger fiscal adjustment in heterodoxthan in orthodox programs because of the risk that a programwith price controls may be misperceived as a populist devicefor achieving price stability without adjusting. * The failure of a heterodox program is more likely to destabilizeinflation than is the failure of an orthodox program.      

SOCIAL SECURITY AND THE POOR: Choices for Developing Countries

There is an urgent need to provide an effective safety net forthe poorest in societies ranging from socialist countries undergoingreform to Sub-Saharan African economies. This article examinessocial security systems in industrial countries and explorestheir relevance to developing countries. The objective of socialsecurity is defined broadly as public action, including thatby communities, to protect the poor and vulnerable from adversechanges in living standards. Relevant instruments include employmentand income guarantees, and also such formal policy instrumentsas assistance, social insurance, and family allowances. Thearticle highlights issues that arise in providing social securityin developing countries, particularly its effectiveness in protectingthe target groups.      

Privatization and Corporate Governance: Principles, Evidence, and Future Challenges

Unless developing countries embrace a corporate governance perspective,privatization is unlikely to provide the benefits of improvedperformance with accountability. This article introduces theconcept of governance chains that can constrain the grabbinghands of public and private actors by providing informationand accountability mechanisms to help investors monitor managers.Empirical data on established firms from 49 countries provideestimates of the relative importance and strength of privateand formal chains of governance. The framework and empiricalbenchmarks help explain the outcomes of past privatizationsand suggest certain steps that governments can pursue to besure to get the most out of future privatization activity.      

THE THREE FACES OF THE INTERNATIONAL COMPARISON PROJECT

Purchasing power parities (PPPs), this article confirms, arethe correct converters for translating GDP and its componentsfrom own-currencies to dollars (the usual numeraire); the alternativemeasure, exchange rates, obscures the relationship between thequantity aggregates of different countries. Drawing on the reportsof the United Nations International Comparison Project (ICP),the article contends that exchange rates systematically understatethe purchasing power of the currencies of low-income countriesand thus exaggerate the dispersion of national per capita incomes.Where full-scale (benchmark) PPP estimates are not available,estimates based on shortcut methods better approximate whatthe benchmark estimates would be than do the exchange rate conversions.The ICP results also illuminate price and exchange rate relationshipsamong countries by providing a measure of the difference inthe levels of prices in different countries. ICP price comparisonsfor components of GDP make possible the analysis of comparativeprice and quantity structures of different countries and providethe raw materials for many types of analytical studies.      

Reducing the Incidence of Low Birth Weight in Low-Income Countries Has Substantial Economic Benefits

Reducing the incidence of low birth weight not only lowers infantmortality rates but also has multiple benefits over the lifecycle. This study estimates the economic benefits of reducingthe incidence of low birth weight in low-income countries, boththrough lower mortality rates and medical costs and throughincreased learning and productivity. The estimated economicbenefits, under plausible assumptions, are fairly substantial,at about $510 per infant moved from a low-birth-weight status.The estimated gains are primarily from increases in labor productivity(partially through more education) and secondarily from avoidingcosts due to infant illness and death. Thus there may be manyinterventions to reduce the incidence of low birth weight thatare warranted purely on the grounds of saving resources or increasingproductivity.