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Migration and development, economic growth, aid effectiveness, economic history
Michael Clemens is co-director of migration, displacement, and humanitarian policy and a senior fellow at the Center for Global Development, where he studies the economic effects and causes of migration around the world. He has published on migration, development, economic history, and impact evaluation, in peer-reviewed academic journals including the American Economic Review, and his research has been awarded the Royal Economic Society Prize. He also serves as a Research Fellow at the IZA Institute of Labor Economics in Bonn, Germany, an Associate Editor of the Journal of Population Economics and World Development. He is the author of the book The Walls of Nations, forthcoming from Columbia University Press. Previously, Clemens has been an Affiliated Associate Professor of Public Policy at Georgetown University, a visiting scholar at New York University, and a consultant for the World Bank, Bain & Co., the Environmental Defense Fund, and the United Nations Development Program. He has lived and worked in Colombia, Brazil, and Turkey. He received his PhD from the Department of Economics at Harvard University, specializing in economic development, public finance, and economic history.
Last night, ABC's "What Would You Do?" featured an intriguing hidden camera experiment on attitudes towards migrant workers. The set up was simple: in a New Jersey deli, actors portrayed a cashier hurling insults and refusing to serve a pair of Latino day laborers because they did not speak English and carried "illegal alien money." The point was to capture the responses of unknowing customers who were asked for help.
How did the experiment unfold? While some stood up in defense of the immigrants, most acted indifferently, walking away. Others joined the insults. "If you want me to make you leave, I'll make you leave," a man said. "We don't want you here." Later to the cameras, he continued with no apologies. "You know what I think? I think they're taking our jobs because there ain't no jobs."
As a Filipino-born immigrant myself, I was reminded that emotionally-charged anti-immigration sentiment is a huge obstacle to development-friendly U.S. migration policy. These attitudes are likely to strengthen now, with high and rising unemployment. But are foreign-born workers an economic problem for Americans? CGD Research Fellow, Michael Clemens, argues otherwise in his latest Op Ed, Immigrants are an Engine of Prosperity.
How will the next administration reconcile the increasing pressure for greater labor mobility given such strong objections to immigration? Michael's essay in the White House and the World offers proposals on how to make immigration policy work for the next administration.
We are at the start of what promises to be an unusually difficult year in the global economy. Policy decisions in the United States and other rich world countries will matter immensely for poor and vulnerable people living in developing countries. Fortunately, there are a number of fairly straight-forward policy initiatives that could make life less difficult for poor people in the developing world while also benefiting the majority in high-income countries. With that in mind, here is my partial policy wish list for 2009:
Avoid protectionism. And may the Obama Administration take a positive step: Offer permanent duty-free, quota-free market access for the poorest countries. That rich countries manage to avoid protectionist trade and industrial policies that would exacerbate the global downturn and be particularly disastrous for household income and unskilled workers (in textiles for example) in low-income countries. A U.S. loan to the auto industry is less bad than the French subsidies that are on the table. Simon Johnson has a good idea. He suggests that the G-20 monitor and report on proto-protectionist steps among its members on its Web site. Besides doing no new harm, how about the incoming Obama Administration proposing to the Congress permanent duty-free quota-free access for select low-income countries as suggested by Kim Elliott? That would put trade to work for development (on which the Doha round has been a flop up to now), at virtually no cost to U.S. jobs.
That the Obama Administration act now on global warming, proposing a gas tax-financed cut in the payroll tax. That the U.S. Congress pass legislation by mid-2009 setting a target for reduced emissions of greenhouse gases (at least an 80% cut from 1990 levels by 2050, which is what President-elect Obama has called for and which would be in line with European pledges). This could be via revenue-neutral carbon charges or public auction of emissions rights, the revenue from which could be remitted to help America's working families adjust to the low-carbon economy as David Wheeler has suggested. Charges should be at least $15-$30 per ton of CO2 emissions; at that level, Wheeler claims that renewable energy, such as concentrated solar, becomes competitive. A first step would be instituting a floor on gasoline prices (I would suggest $3.50 to start moving to $4 over a year or so) as Kemal Dervis has proposed and as Tom Friedman has implored. A gasoline tax could be progressive and revenue-neutral if it financed a reduction in the payroll tax; that in turn would encourage job creation which Dani Rodrik wants to see as central to the stimulus package.
Get serious about development as one of the Three Ds. That the Obama Administration strengthen the development leg of the three-legged foreign policy stool (defense, diplomacy and development) which I have noted could be done at a budget cost of less than $10 billion per year, excluding new R&D in clean energy. This amounts to an incredibly big bang for the buck in restoring global respect for the United States, especially when compared to the hundreds of billions we spend on traditional "security" and defense. The $10 billion covers not only reform of U.S. foreign assistance but also development-focused policy fixes to U.S. trade, migration and climate change policy.
Modernize foreign assistance -- and take the lead on universal basic education. That the incoming U.S. administration and the new Congress work together to lay the foundation for a major reform of U.S. foreign assistance programs, and embrace innovations such as our Cash on Delivery (COD) Aid proposal. Also that the United States take leadership creating a Global Education Fund to promote universal basic education, recently proposed by Gene Sperling and others.
Get the facts on global migration. That OECD members agree to ensure that all their 2010 censuses will include three basic questions about the movement of people (including "Where were you born?" and "Where did you live five years ago?") that would enable sound empirical research on migration and development. Such research could help to motivate policy changes that would foster development-friendly increases in the temporary movement of people across national borders, especially people from developing countries who seek opportunities in rich countries (on this issue, stay tuned for the recommendations of our Commission on International Migration Data for Development Research. Meanwhile, read Michael Clemens' recommendations for the incoming Obama Administration and a striking working paper on the wage gaps caused by barriers to movement across international borders.)
Reform governance at the IMF and the World Bank. That the current crisis breathe life back into officialdom’s efforts to reform the IMF and the World Bank, especially to reform their embarrassingly outmoded mid-twentieth century governance arrangements. Specifically, that the announced commissions on IMF and World Bank governance, led respectively by Trevor Manuel and Ernesto Zedillo go beyond the timid incremental fixes of the last couple of years (marginal increases in votes and a third chair on the World Bank Board for African countries). For example, how about getting the United States and Europe to publicly renounce their patronage privileges in the appointment of future heads of the World Bank and IMF, respectively? Or how about instituting special majorities (for an excellent exposition see also) for election of those heads, that would require, for example, a majority of country members as well as a majority of weighted votes?
Is this too much to hope for in 2009? Which of these wishes looks promising to you and which is a bridge too far? Since seven is the magic number for a memorable list, what would you add?
We at CGD warmly welcome president-elect Barack Obama's appointments of Timothy Geithner as Secretary of Treasury and Lawrence Summers to head the National Economic Council. Both are members of the CGD Board of Directors. This is no coincidence. It reflects the fact that both are tremendously knowledgeable about the problems and challenges faced by the world's poor and are committed to policies to help address those problems -- both in the interests of the poor in the developing world and of the United States itself. That can only be a good thing at a time when the U.S. economy hangs by a thread -- and the thread is sustained and inclusive of growth in developing and emerging market economies such as China, India, and Brazil.
I worked for Larry Summers in the early 1990s, when he was World Bank chief economist and I was director of the policy research department. Among other contributions, he was an early champion of the then-new idea that investing in the health and education of girls pays huge dividends, for the girls themselves and for society (for more on Larry's record on women's issues, read Sheryl Sandberg's column in the Huffington Post; and for up-to-date policy prescriptions on the value of empowering adolescent girls, see Ruth Levine's fine CGD report, Girls Count: A Global Investment and Action Agenda).
Timothy Geithner is described in one thoughtful profile earlier this month as "razor sharp but with an easy way about him." That certainly matches my impressions from his contributions to our board meetings, including the thoughtful remarks he made at our board dinner in 2006. Tim understands the role of multilateral financial institutions: between his time as Undersecretary for International Affairs at the Treasury and his going to head the Federal Reserve in New York, he was a senior official at the IMF. I also find it encouraging that in recent speeches he has referred several times to the problem of high and rising inequality in the United States (see for example this recent Wall Street Journal profile) This suggests to me that Tim also recognizes the risks posed by global inequality and inequality within poor countries, an area of ongoing research here at CGD that has been a particular interest of mine.
I spoke this week at the Global Forum on Migration and Development here in Manila, at both the government meetings and the civil society days. I came here to highlight the many policy questions about migration and development that can't even be asked until we have better data on human movement. As I've carped about before, it is much easier to gather statistics on the cross-border travels of coffee beans and toothbrushes than it is to count the international movement of maids and physicians.
At every opportunity, I told Forum delegates about the blue-ribbon commission (www.migrationdata.org) on migration data that CGD has assembled with the help of the MacArthur Foundation. In February the commissioners will suggest a few top-priority steps that could quickly make available much more data to study how migration and development interact.
Who cares about migration data?
The Forum delegates did, I was happy to see. The civil society folks energetically supported the need for research and didn't bristle, as I feared they might, over potential concerns about privacy. (Among others, the IPUMS project at the University of Minnesota has proven that large amounts of highly detailed data crucial to migration research can be made freely available without violating anyone's privacy.) And the government crowd soundly endorsed the pressing need to get detailed questions about country of birth and citizenship on the 2010 round of censuses, one of our commission’s top priorities.
Unfortunately, the government of the United States, my country, chose to all but ignore this Forum. Even miniscule Antigua and Barbuda (population 84,000) sent an official delegation, as did 162 other nations. But the top migrant destination country on earth, a country built from the ground up by immigrants, a country whose migration policy is in such disrepair that we forcibly deported 1.2 million people last year, sent only a "note-taker" to this Forum. A senior session chair told me that this snub didn't surprise him one bit since, he said, the United States "has made itself irrelevant to multilateral discussions of the most pressing global issues in the last decade. You know, we don’t really miss them anymore." Others present nodded. It hurt.
The U.S. president elected next week will have a chance to lift our stature from this nadir. A great place to start would be to take seriously the role of migration in development. I've suggested, in my essay for The White House and the World, Don’t Close the Golden Door: Making Immigration Policy Work for Development some specific ways he could do that (for the busy reader, here's a policy brief) that summarizes the main recommendations). Another way would be to send a delegation to the next Global Forum on Migration and Development, in Athens next year. Showing up would be a good first step towards demonstrating our willingness to work with others to find ways to manage the global movement of people in ways that benefit everyone.
We use a panel of country-level crop yields in Africa to estimate the relationship between yields and temperature as well as precipitation. Maize, sorghum, millet, and groundnuts are predicted to show significant yield reductions in the medium term even under moderate warming. Our estimation uses the distribution of temperatures within each day at the location a particular crop is grown. Given potential data quality issues for Africa, the predicted temperature response function is contrasted to the one in the United States, where we find robust nonlinear temperature effects, i.e., yields are first increasing in temperature, but decrease sharply once they pass an upper threshold (29C for maize). The slope of the decline above the threshold is much steeper than the incline below it. The increased frequency of temperatures above the upper threshold is responsible for the significant reduction in yields.
Doing research on migration and development is tough. Some of the most basic questions can't even get off the whiteboard because data on migration are so limited. If the government of Kenya wants to know how many doctors went last year from Nairobi to London, or vice versa, no one can tell. If a hard-working economist wants to know how many Pakistanis have temporary labor contracts in the Gulf countries, good luck.
Migration is shaping global development, but much of it is inscrutable. Even legal movements occur in the shadows.
Now, even talking about this subject is a triumph of hope over experience. Since 1922 and before, international agencies have been making unheeded recommendations to improve migration data. But I heard some great ideas this week that gave me more faith than ever that there are concrete ways forward. Here are three among many:
Point out the policy question. If you exhort the U.S. government to do more to track the international movements of skilled workers, you might get a yawn. Suppose you instead said, "Because the United States strictly limited its skilled H-1B visas to 85,000 last year, and demand for them is enormously higher, how many of the world's best and brightest are we losing to Canada and Europe?” No one really knows. Now the value of data becomes more distinct.
Produce estimates to elicit reaction. Most countries on earth don't even publicly count how many people from each other country are within their borders. What would make them care about doing so? When an independent agency produces their own numbers using indirect estimation methods, government might have an incentive to collect and publish the real numbers to set the record straight.
There's great stuff in the pipeline. I'm continually amazed by the major advances being made in this area. The UN is now beta-testing an amazing new public database, for example, that compiles all of its data on migrant stocks all over the world. Compiling what we have is important, and free public dissemination even more so.
I will be there in Manila at the Global Forum, discussing the draft recommendations of a blue-ribbon commission on migration data that CGD has convened with the help of the MacArthur Foundation. (The Commission's recommendations aren't finalized yet, but watch this space for more on that.)
Does the emigration of highly educated people necessarily deplete skills in developing countries through a brain drain? Maybe not. In Fiji, according to a new CGD working paper by Satish Chand and CGD research fellow Michael Clemens, the sudden and massive departure of people with higher education not only raised investment in tertiary education but also increased the number of well-educated people inside Fiji, even after subtracting those who had left.
Bureaucracies with field operations that cannot be easily supervised and monitored are often caught in two potential sources of dysfunctions: field agents using asymmetric information to their own advantage, and limiting fields agents’ ability to use the same information to improve projects. In his new paper, Dan Honig examines this trade-off in the context international development organizations (IDOs).
Do the costs of international migration outweigh its benefits for the poor? Many people I talk with suspect that migration should be regulated on development grounds—because it might bring large social costs, as well as private costs that the migrant is too poorly informed to account for.
A good first step is to measure the private benefits, because that gives us an idea of how large those other costs would have to be in order for international migration to be a net harm.
Zahid Hussain at the World Bank describes a new dataset on low-income migrants, the Bangladesh Household Remittance Survey 2009 by the IOM, calling it the “largest dataset on migrant households that I am familiar with”. I don’t have access to the data now, but the summary numbers that Hussain reports allow a back-of-the-envelope calculation of the private economic benefits of migration.
Hussain reports that the average Bangladeshi pays about $3,150 to migrate—mostly to the Middle East—covering costs of travel, intermediaries, and so on. A stint abroad earns the average migrant $3,690 per year, or about $11,050 total for a typical three-year spell. Of that, about $6,850 is either remitted home or brought home as savings. Almost all of the migrants are men. (I’m converting currency at today’s rate of 69.5 Bangladesh Taka = US$1).
That’s a stunningly profitable investment. The large, up-front cost of emigration is yielding these migrants a 117% annual return. Most of that is spent in Bangladesh. For comparison, Mark Pitt and Shahidur Khandker estimate the returns to much-vaunted microcredit for Bangladeshi men at just 11%, and CGD fellow David Roodman and Jonathan Morduch suggest that even this figure may be optimistically high.
Compare these returns with the annual income of the average Bangladeshi: $1,000 per worker. In other words, the migration investment allows these workers to multiply their earnings by a factor of 3 or 4. How much would you pay for a financial product that, with very high probability, tripled or quadrupled your income? What other investments can low-skill Bangladeshis access that would give them even a fraction of this return at low risk?
The burden of proof should be high to show that jaw-dropping returns like these are negated by similarly huge social costs. There is little evidence that any social costs are typically this large. For example. recent research by Mariapia Mendola at the University of Milan-Bicocca suggests that many standard concerns about social costs are overblown. She offers evidence that rural-urban migration in Mozambique does little to weaken (and may strengthen) social capital in the places of origin. She also shows that Bangladeshi households able to engage in international migration are more likely to employ modern farming technology, become more productive and growing the local economy.
My discussion here involves back-of-the-envelope calculations, not rigorous analysis (for example, what I calculate here are mechanical rates of return and not economic rates of return, which would account for opportunity costs). So before making policy conclusions, a lot more research is needed on the real effects of international migration. I am now engaged in exactly that kind of research.
But it’s important to start from an appreciation of the sheer magnitude of the returns to the migration investment. For many of the poor, migration may be the most profitable investment on their menu, by far. Limiting access to such an investment on the grounds of social costs is something that should be pondered only with solid and extensive evidence that those costs are enormous.
While participating in an interesting and thoughtful eDiscussion organized by the UNDP on Securing Fiscal space for the MDGs, I was struck by how much different approaches to the issue-say between the IMF and the UNDP-are driven by different implicit assumptions about the likely effectiveness of additional spending. Whatever you think about the usefulness of the MDGs as the basis for organizing a development strategy (see Michael Clemens’ blog for a skeptical view) , how to manage the macro-fiscal challenges of scaling-up spending to meet social objectives is highly contentious. The IMF role, in particular, has been criticized by many.
I have been thinking about this a lot lately, drawing on my earlier experience as Deputy Director of the IMF Independent Evaluation Office (and before that as a long-time IMF staff member) and more recently as Chair of a Working Group set up by CGD to investigate IMF programs and health spending.
My own view can be summarized as follows: take care of the effectiveness of spending and the macroeconomics will take care of itself. In other words, whether or not we should worry about the macroeconomic challenges associated with an aid-financed scaling up of spending largely depends on the likely supply response.
For example, if higher aid-financed spending on non-traded goods leads to a temporary 'Dutch disease' effect, we should not be too concerned provided the longer-term effects of MDG-related spending improve competitiveness. More generally, if the additional spending eventually has a significant impact on economic capacity, it is hard to see how any of the "short-term" macro problems would be insuperable; eventually, positive supply responses would be sufficient to take care of them.
Clearly, some policy adjustments down the road would be needed, depending on how the benefits are distributed. For example, additional sources of tax revenue may be needed to finance spending with high social returns if those returns do not directly improve revenues. Also, shifts in the real exchange rate will depend on how any productivity gains are distributed between the traded and non-traded sectors. It is very difficult to predict in advance how improved health and education might influence these developments, but the point is that future policies can adjust without major hardship provided overall economic capacity is rising sufficiently.
Obviously, the motivation for MDG spending is not just to raise output-it is to improve the lives of the poor. But if (and unfortunately it is a big if) the planned MDG-related spending is effective and achieves its objectives, then it is hard to imagine that the countries' economic capacity would not be sufficient to handle any macro challenges that result. So the key challenge is not really a 'macro' one at all-it is to make sure that additional spending will be used effectively, which requires good governance, sound public financial management, and good sector-level policies.
Personally, I suspect that underlying many of the disputes about macro frameworks between the IMF and its critics are fundamentally different views about the likely effectiveness of higher spending. The IMF often seems to assume implicitly that additional public spending will have little impact on growth. In contrast, those who produce MDG-costing scenarios often seem to assume that the 'technical' costing ratios around the MDGs can be scaled up with none of the huge governance problems and 'leakages' to other types of less useful spending--let alone outright corruption-- that have been a fact of life in almost all countries. In practice, we can never know--without trying them--what the impact of more ambitious spending strategies will be. So we are really faced with a question of balancing the risk that the supply responses are too weak to prevent inflation, Dutch Disease, fiscal sustainability and other threats to macro stability against the risk of foregoing expenditure opportunities that may improve the lives of the poor and raise growth.
My own view is that, because the macro starting position in most countries--in Africa and elsewhere--is so much better than a decade ago, the balance of risks should shift toward trying more ambitious fiscal/spending options if: (1) governance improvements are sufficient to give a reasonable chance of success; and (2) donors make some form of commitment that they will not pull the plug on their aid prematurely--which requires some understandings on what the true 'conditionality' is, both political and otherwise. Both of these are very big questions that need hard answers before embarking on ambitious spending strategies. But if the answers are reasonably positive, it is worth taking some risks.
In many ways, the role of the IMF is central to this debate--and it has not done enough to adapt to the new challenges faced by many of its low-income member countries. To learn more, check out the final report of the CGD Working Group on IMF Programs and Health Spending, mentioned earlier, which points to the need for significant changes in the IMF way of doing business in low income countries.
A subcommittee of the U.S. Congress has just approved a bill that would let modestly more foreign nurses work in the United States. New York Times reporters are concerned that measures like this, by encouraging movement of nurses out of developing countries that need them, could literally kill children. Today, the World Health Organization agrees that health worker movements contribute to disease and death in poor countries.
Should you be outraged at our government? Should our representatives who encourage nurse migration be locked up alongside the murderous Radovan Karadzic, as a stunning article in the respected medical journal The Lancet asserts?
The debate on this topic often misses three big facts: 1) Blocking the movement of developing-country professionals does certain harm to them, 2) supposedly softer measures like overseas recruitment restrictions tend to block movement just like migration barriers, and 3) there is no scientific evidence that restricting their movement by force can meaningfully affect the health problems devastating many poor countries. Without such evidence we should be very hesitant to take strong steps that prevent overseas health workers from accessing the very high-paying jobs that Americans take for granted by birthright. I'll discuss recent research on these three points.
1. Evidence on harm to health professionals who want to move
Any discussion of this issue must recall that nurses who come from poor countries to work in the United States dramatically improve their lives and their families' lives. Registered Nurses I met in Mozambique earn about $3,000 per year. Here, the same person can easily earn more than 20 times as much. Marko Vujicic at the World Bank has gathered related data for several countries.
Suppose someone informed you that you could not have your current job, even though your employer wanted you and could find no one else. Suppose they went on to inform you that instead you'd have to take a job you don't want, in a neighborhood you don't want to live in, earning one twentieth as much as you do now. Your life would probably turn suddenly into a debased struggle for survival. You might even question the ethics of what was done to you. A recent paper of mine, "The Place Premium", discusses in detail how this is precisely analogous to wage discrimination that, domestically, we abhor.2. Policy proposals to block health worker movements
Even this new bill severely limits the number of health professionals who can make it past border guards. But many of the people fighting health worker movement want more than that: they would like to see restrictions on the recruitment of health professionals overseas, and would like the U.S. government to move the U.S. toward "self-sufficiency" in health professionals so that none need come here. These two policies are espoused, for example, by Harvard's Lincoln Chen, who co-authored this piece.
Though they are not strictly immigration policies, both of these measures would block the movement of people. Limiting recruitment means forbidding people from going to other countries and informing them about job opportunities here, opportunities that they are free to accept or decline. This would tend to block movement, because you cannot move to take a job you never found out about. 'Self-sufficiency' means the U.S. taking policy steps to ensure that no healthcare jobs for foreigners exist here, because they have been filled by people who are already here. This too would block movement, because those jobs are the basis of entry for many. All of these measures have the consequence of restricting movement, and all are coercive: they limit the choices available to health professionals, without consulting those professionals.3. Evidence on the effects of health worker movement
But does any method of blocking movement actually save children's lives? In order to believe this, you have to believe that trapping people in a place they don't want to live – by itself, and all else equal – saves children. There's no evidence at all that forcibly stopping nurse movement, without changing anything else in the countries they come from, saves people.
Take Africa, for example. Most health professionals live in the cities and although most of the people who could benefit from their care are in the rural areas. The main childhood killers are infectious diseases that are better battled through preventive public health measures rather than treatment. And those treatments that are most urgently needed do not require the skills of a Registered Nurse with a university education. Finally, because of all this, and poorly funded health systems to boot, there are large numbers of unemployed nurses in many countries.
In this context, we should not be surprised at all that there is no causal relationship between the pure presence of African health professionals outside the borders of their countries – the only thing that can be affected by curbs on international movement – and a variety of indicators of healthcare availability and health outcomes in the countries they come from. My paper on this subject, called "Do Visas Kill?", points out that it is precisely the African countries with the most health workers abroad that have the most at home. Whatever is the principal determinant of shortages in Africa, it is not international movement.
(And I can't finish without getting one thing out of the way: those new nurses Congress contemplates admitting will not displace any Americans. We currently have vacant nursing positions numbering in the hundreds of thousands -- a shortage that the U.S. government predicts will grow to around one million a decade from now -- and the bill would let in a maximum of 20,000 per year, for three years only.)
Africa needs stronger health systems, to be sure, but can we build those systems with our immigration policy? There is no scientific evidence that this has happened anywhere, or is possible anywhere. We should be very hesitant to force real people with real families to accept wages that we would never accept, without overwhelming and indisputable proof that by itself this blunt act does enormous good.
Until such evidence arrives, America's increasing willingness to give opportunity to low-income health workers should be welcomed around the world.
Corruption in hiring for public sector jobs is common in developing countries, and has been assumed to have a detrimental effect on delivery of government services. This paper provides a framework for understanding this type of corruption and demonstrates that it need not have negative consequences. Weaver collects original data from a hiring process for managerial positions in a developing country health bureaucracy, and finds that hires paid large bribes, averaging 17 months’ salary. He uses data on bribe offers to characterize the structure of these markets, showing that job allocations are made as if via a first-price, winner-pay, sealed bid auction. To establish the consequences of corruption, he estimates a structural model of entry to determine hires under counterfactual hiring procedures, such as standardized testing, and compares them to actual hires. For this comparison, Weaver identifies causal relationships between a set of hire characteristics and better delivery of health services. Based on these characteristics, actual hires are of comparable or superior quality to the hires under counterfactual systems, e.g. as compared to hires under a knowledge-based test, actual hires are 4.3-8.7 percentage points closer to the predicted optimal set of hires. Although hiring decisions are based primarily on bribes, hires are high quality because applicant wealth and willingness to pay for the position are strongly positively correlated with quality. Applying this to a general model of hiring, he identifies the environments in which corruption will lead to misallocation, discusses how anti-corruption efforts should be designed, and argues for a greater focus on hiring for mid-level government managers.
With a contribution to date of almost $13 billion, PEPFAR is the largest foreign aid program ever dedicated to a particular disease. Impressive results are documented regularly on PEPFAR's website detailing partners supported, numbers of people treated, cared for and infections prevented to name a few accomplishments of this mammoth and unparalleled program. These results alone don't tell us whether the program is doing its best or could do better to stop the epidemic. While it may be too early to estimate the impact of PEPFAR, a short-term evaluation could certainly tell us if the program is heading in the right direction. So how is PEPFAR doing?
That is the question that the Institute of Medicine (IOM) has tried to address in its long awaited evaluation report released Friday morning. The evaluation team of experts examined the first 2 years (2004-2006 for the evaluation period) of PEPFAR's implementation progress and makes recommendations to improve PEPFAR going forward. The report is 420 pages long and valued at ~$40 for a download or a hard copy, so our initial analysis is based on the IOM briefing yesterday morning and from our quick reading of sections of the report, which is now available for free to read on the website.
The overarching theme of the evaluation, as explained by chair Dr. Jaime Sepulveda, is that "PEPFAR will need to make the transition from an emergency plan to a sustained effort that invests in building the capacity within countries to eventually take full responsibility for responding to their epidemics." A number of recommendations labeled as "opportunities" for improvement of PEPFAR that would support this transition have been identified by the evaluators and resonate strongly with the widely held view that things have gotta change for longer term success! Details of these opportunities are discussed at length in the main report, but here are some key highlights:
What Stands Out? Why?
Giving more attention to sustainability makes good sense, but it is unclear what this will mean in practice. The report emphasizes that an essential part of the way forward is to make large new investments in training more health workers, program managers, and other "human capacity." Easier said than done - recruiting and retaining health workers in the system is often more of a challenge than training them. As our CGD colleague Michael Clemens found in his analysis of the migration of health professionals out of Africa, that health care worker shortage is less about migration than it is about incentives for health workers to take these jobs in many of the countries supported by PEPFAR. So, how exactly will PEPFAR tackle this and other key issues? Should PEPFAR be giving more money directly to governments vs. non-governmental organizations? What effects are PEPFAR programs themselves having on the workforce? And how can PEPFAR programs be used to strengthen national health systems, since the report notes that "PEPFAR is a vertical program"? These are some questions among many that we are examining in our ongoing country-level research.
The most important recommendation in the report could prove to be the call for Congress to remove all funding earmarks (i.e. 55% of funding should go for treatment, 20% for prevention, etc.) when it passes legislation to "reauthorize" PEPFAR in the coming months. Again, another check on our wish list! Earmarks are an unnecessary constraint to programming, since we have seen that the allocations have become targets themselves. The report frames the problem well: "contrary to basic principles of good management and accountability, the budget allocations have made spending money in a particular way an end in itself rather than a means to end - in this instance, the vitally important end of saving lives today and in the future."
There is also a tension between imposing universal rules on how money can be allocated, while trying to implement a program that is responsive to each country's priorities. As Dr. Sepulveda noted, earmarks have "limited PEPFAR's ability to tailor their approach to countries, and adjust to national plans." He went on to say that there was "no logic to having earmarks for 15 different countries." Let's hope Congress sees it the same way, and decides to remove any funding restrictions when it drafts the new PEPFAR law. Early legislative endeavors such as the recent PATHWAY Bill re-introduced in the House by Reps. Lee and Shays last week are bolstered by these IOM recommendations and perhaps will allow for earlier legislation to remove the 1/3 abstinence only earmark and establish a comprehensive and integrated HIV prevention strategy to address the vulnerabilities of women and girls in countries.
The recommendation to PEPFAR to boost funding for prevention (which could be facilitated by removing funding earmarks) presents a critical opportunity to PEPFAR. Dr. Sulpuveda's emphatic words on this point say it all - "we need more prevention efforts and better prevention efforts, with a larger profile...without prevention, the epidemic will never end." Improving prevention activities, he said, would require larger investments in epidemiological and behavioral research. (Dr. Sulpuveda was asked about the ABC approach, but skillfully managed to avoid a direct answer on that one.) Our colleague Mead Over will be tackling the re-focus on prevention in a soon to be released brief. Stay tuned!
"Better late than never" truly applies to the IOM evaluation report, given the repeated delays in completion. The IOM committee deserves much credit, not only for taking on this enormous task but also for calling for improvements in the PEPFAR program that seem Appropriate, Beneficial, and Concrete (ABC, if you will!). The focus should now shift to the actors who can take these recommendations to action - Congress and the Office of the US Global AIDS Coordinator. Decision makers from both bodies are reading the report closely, and we'll be waiting to hear if, and how, they intend to act on the report's key recommendations.
A very good first step would be for OGAC to issue an official response to the IOM report, and feature the response on its website so that an open public dialogue can occur on how to best improve PEPFAR going forward.