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Economic analysis for health projects

  • Hammer, Jeffrey S.

The author applies to the health sector an approach to analyzing projects advocated in a recent paper by Devarajan, Squire, and Suthiwart-Narueput. In the health sector, a project evaluation should: 1) Establish a firm justification for public involvement. The author identifies a number of common failures in the markets for both health services and insurance but argues that this should be the starting place for economic analysis, not a reason to ignore economics; 2) Establish the counterfactual: what happens with and without the project. Project outputs should be predicted net of the reaction of consumers and providers in the private sector. This requires knowledge of the market structure (supply, demand, and equilibrium) for health services; 3) Determine the fiscal effect of the project. The issue of appropriate levels for fees should be handled jointly with project evaluation; and 4) Acknowledge the fungibility of project resources and examine the incentives facing public servants. Ministries of health may shift their own resources away from activities that are funded by project to those that are not evaluated at all. Project outputs depend on the incentives for civil servants to provide good service--a consideration rarely taken into account in project evaluations. The author concludes that much of the analysis relevant to projects should be done before project evaluation. If the issues of fungibility and incentives are given due respect, the donors'best form of intervention may not be traditional projects at all but rather general loans with conditions related to general sector strategy and reform. For a standard project, a fair amount of information from supporting sector work is needed before evaluation. If clinical services (or anything depending on people s behavior) are part of the project, information is needed about the supply and demand for substitute services. The market structure of health care is an essential part of the background work.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1611.

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Date of creation: 31 May 1996
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Handle: RePEc:wbk:wbrwps:1611
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  1. Alderman, H. & Gertler, P., 1989. "The Substitutability Of Public And Private Health Care For The Treatment Of Children In Pakistan," Papers 57, World Bank - Living Standards Measurement.
  2. Anand, S. & Hanson, K., 1995. "Disability-Adjusted Life Years: A Critical Review," Economics Series Working Papers 99174, University of Oxford, Department of Economics.
  3. Anand, Sudhir & Hanson, Kara, 1997. "Disability-adjusted life years: a critical review," Journal of Health Economics, Elsevier, vol. 16(6), pages 685-702, December.
  4. Kim, A. & Benton, B., 1995. "Cost-Benefit Analysis of the Onchocerciasis Control Program (OCP)," Papers 282, World Bank - Technical Papers.
  5. Paul Gertler & John Molyneaux, 1994. "How economic development and family planning programs combined to reduce indonesian fertility," Demography, Springer, vol. 31(1), pages 33-63, February.
  6. Germano Mwabu & Martha Ainsworth & Andrew Nyamete, 1993. "Quality of Medical Care and Choice of Medical Treatment in Kenya: An Empirical Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 28(4), pages 838-862.
  7. Hammer, Jeffrey S. & Berman, Peter, 1995. "Ends and means in public health policy in developing countries," Health Policy, Elsevier, vol. 32(1-3), pages 29-45.
  8. Alderman, Harold & Lavy, Victor, 1996. "Household Responses to Public Health Services: Cost and Quality Tradeoffs," World Bank Research Observer, World Bank Group, vol. 11(1), pages 3-22, February.
  9. Hammer, Jeffrey S, 1993. "The Economics of Malaria Control," World Bank Research Observer, World Bank Group, vol. 8(1), pages 1-22, January.
  10. Hammer, Jeffrey S., 1993. "Prices and protocols in public health care," Policy Research Working Paper Series 1131, The World Bank.
  11. Kloos, Helmut, 1990. "Utilization of selected hospitals, health centres and health stations in Central, Southern and Western Ethiopia," Social Science & Medicine, Elsevier, vol. 31(2), pages 101-114, January.
  12. Pitt, Mark M & Rosenzweig, Mark R & Gibbons, Donna M, 1993. "The Determinants and Consequences of the Placement of Government Programs in Indonesia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 319-48, September.
  13. Pritchett, Lant H. & DEC, 1994. "Desired fertility and the impact of population policies," Policy Research Working Paper Series 1273, The World Bank.
  14. Korte, R. & Richter, Heide & Merkle, F. & Görgen, H., 1992. "Financing health services in Sub-Saharan Africa: Options for decision makers during adjustment," Social Science & Medicine, Elsevier, vol. 34(1), pages 1-9, January.
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