The Unassuming Economist

In a column for VoxDev ( December 2021), economists Eeshani Kandpal and Elina Pradhan of the World Bank Development Research Group, Madhulika Khanna from Yale University, and Benjamin Loevinsohn of The Global Fund explain results from an experiment in Nigeria. “Providing operating funds to public health facilities can be as effective as alternative pay-for-performance models, at half the cost”, they write.

The authors discuss some factors besides poor effort put in by healthcare workers, such as lack of control on operational budget by PHCs which causes delays and other inefficiencies to build a case in favor of decentralized financing. The study compares outcomes from two interventions- pay for performance and decentralized facility financing. It presents conclusions about the performance of both interventions in areas like quality of service delivered, immunization of children, use of contraceptives, antenatal care-seeking. The article also discusses several policy insights.

Click here to read the full column.

The latest report by World Health Organization, Global expenditure on health: Public spending on the rise? (2021), highlights interesting statistics about expenditure in high income, low income, and low middle-income countries on primary healthcare, the correlation between government spending and out-of-pocket expenditure, trends in public investment patterns, etc. It analyzes data over a 20 year period, from 2000 until 2019, and provides crucial policy insights alongside recent developments.

“Overall, global spending on health has doubled in real terms over the past two decades, reaching US$ 8.5 trillion in 2019 and 9.8% of GDP (up from 8.5% in 2000). Spending on health remained highly unequal—and more unequal than the distribution of global GDP. High income countries accounted for nearly 80% of global spending on health (with the United States of America alone accounting for more than 40%), and their average spending per capita was more than four times the average GDP per capita of low income countries. In countries for which data were available, about half of health spending went towards primary health care (PHC), representing about 3% of GDP on average. Nearly half of PHC spending was funded by private sources, the same as for non-PHC services. Among the low income countries for which data were available, about one-third of PHC spending came from external aid and one-fifth came from government sources, whereas the composition was reversed for non-PHC spending. Further analysis from a set of low and middle income countries indicates that the share of PHC spending that went to infectious diseases was significantly higher than the share that went to noncommunicable diseases and injuries.”

Click here to access the full report.

OECD’s latest report, Pensions at a Glance (2021), discusses in detail the financial pressures arising out of rapidly ageing global populations. Although life expectancy gains in old age have slowed since 2010, the pace of ageing is projected to be fast over the next two decades. The size of the working-age population is projected to fall by more than one‑quarter by 2060 in most Southern, Central and Eastern European countries as well as in Japan and Korea.

Pension finances deteriorated during the pandemic due to lost contributions, and shortfalls have been mainly covered by state budgets. The report emphasizes the fact that the biggest long-term challenge for pensions continues to be providing financially and socially sustainable pensions in the future. Many countries have introduced automatic adjustment mechanisms (AAM- adjusting retirement ages, benefit levels and contribution rates and using an automatic balancing mechanism) in their pension systems that change pension system parameters, such as pension ages, benefits or contribution rates when demographic, economic or financial indicators change. Putting pensions systems on a solid footing for the future will require painful policy decisions.

Click here to read the full report.

The recent McKinsey American Opportunity Survey (2021) highlights interesting observations about American beliefs on the availability of economic opportunity, obstacles, and the path ahead to create a more inclusive economy. A sample of 25,109 adults aged 18 and older from the continental United States, Alaska, and Hawaii was interviewed online in English and Spanish. Excerpts from the report’s findings:

“Americans report that their financial situations have deteriorated over the past year, and at the time of our survey, only half of all respondents reported being able to cover their living expenses for more than two months in the event of job loss. Americans reported facing numerous barriers to economic opportunity and inclusion—among them, inadequate access to health insurance and physical and mental healthcare, as well as to affordable childcare. Moreover, many respondents said that they feel their very identity limits their access to jobs and to fair recognition and reward for their work.

Yet amid the challenges, our survey also revealed optimism. First- and second-generation immigrant respondents were among the most optimistic respondents about economic opportunity. Black and Hispanic/Latino respondents were also among the most optimistic respondents, despite being more likely to report barriers to opportunity.”

Click here to read the full report.

In the latest blog for The Conversable Economist, author Timothy Taylor examines the merits of the statement whether the US needs a sound industrial policy to fuel economic growth like its counterparts like China or not. While the modern version of this argument states that the US needs to subsidize key industries to counterbalance China’s growing economic influence in the world, he also discusses the historical context to this backed by strong macroeconomic fundamentals. The author quotes excerpts from a report by the Peterson Institute of International Affairs:

“The World Bank’s acclaimed volume, East Asian Miracle: Economic Growth and Public Policy (Birdsall et al. 1993), while acknowledging industrial policies, emphasized sound macroeconomic policies (later labeled the “Washington Consensus”), together with superior education and land reform, as drivers of remarkable growth in Hong Kong, Japan, South Korea, Singapore, and Taiwan. A decade earlier, Chalmers Johnson (1982) had published MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975, giving outsized credit for Japan’s spectacular postwar economic growth to government support for specific firms and industries. These two volumes set the stage for prolonged debate, still underway, on the role of industrial policy in East Asian economic prosperity. Numerous academic articles and books have dissected contributing factors. This brief section merely skims the surface of a substantial literature.”

Click here to read the full blog.