Chapter 1.4 looks into official development assistance. Official development assistance (ODA) is provided by governments or multilateral development banks (MDBs) to support economic development in other countries. Key learning includes that

• ODA is critical to achieving the United Nations Sustainable Development Goals (SDGs) in the world’s poorest countries

• The lowest-income countries typically receive less ODA than comparatively wealthier countries due to their limited capacity to absorb additional funds.

• MDB funds are best utilized when they are invested in under resourced areas, such as global or regional public goods, and when they are well-aligned with domestic policies and national goals.

• ODA success (i.e. resources having a meaningful impact on development outcomes) depends on

• – Prioritizing the right long-term development challenges

• – Effective domestic governance and an active role for national-level stakeholders

• – Transparency around ODA activities

• – Continuous assessment, evaluation, learning and improvement.

• ODA and financing institutions must adjust to new challenges such as climate change

• – moving away from a sector-by-sector approach, addressing trends and emerging themes and delivering innovative and agile financing mechanisms.

Chapter 3.1 draws out insights into the way primary care is paid. Primary care delivers first-contact access to health services and seeks to coordinate care. It is paid for in different ways in different settings: through salary, capitation (a fixed payment per enlisted patient), fee for service, pay for performance or blended payments that combine two or more of these methods. Key learning includes that

• The way health systems pay for primary care can incentivize treatment that supports wider health systems’ goals, most particularly by

• – Reducing avoidable referrals to secondary care, improving efficiency and reducing waste and

• – Encouraging adherence to evidence-based clinical guidelines, enhancing quality.

• Pay for performance is often used to improve quality but the evidence on how effective it is, is mixed. If performance measures are not carefully designed to be context-specific and adjust for risk appropriately, they can create unintended barriers to and inequalities in access.

• The design of primary care payment models needs to be ‘holistic’, to consider the goals of the health system and to underpin quality, access and efficiency.

Chapter 3.3 examines informal payments. Informal payments are unsanctioned, unregulated payments made out-of-pocket by patients directly to their health care provider for services that are covered by third party purchasers. They are not recorded in routine administrative databases but can be captured in surveys, although they are usually underreported. Key learning includes that

• Informal payments (IPs) reduce access to health care and financial protection. They can undermine population health and reduce trust in providers and governments in the long run.

• IPs often stem from unmet desire for safe, timely or high-quality care and imply a mismatch between supply, demand and pricing in the formal health care payment system. When formal system payments are felt to be inadequate, IPs may also be used to express gratitude to providers.

• Settings with low physician density and / or where the share of GDP spent on health care is low, tend to have higher levels of IPs.

• IPs are also associated with settings with high reliance on formal out-of-pocket payments (user charges).

• Reducing or ending IPs is difficult and requires a combination of specific, targeted measures and broad health systems reforms that address underlying causes.

• The policy measures that may reduce IPs include

• – Formalizing out-of-pocket payments, with exemptions to protect vulnerable populations

• – Making clear and explicit what the health care benefits package covers

• – Better monitoring and enforcement of rules and penalties

• – Maintaining and expanding publicly-financed statutory coverage.

The chapter further discusses the differences between the two types of DoL. DoLfg is famously captured by Smith’s tailor–farmer–shoemaker example; the benefit from trade supposedly holds regardless of whether production advantage is natural or can be acquired. Ricardo spiced it up with comparative advantage to form the England–Portugal model. Smith illustrates firm-level DoLop with pin-making and economy-level DoLop with woollen-coat procurement. Ricardo briefly considered how, with DoLop, stockings were made, but he otherwise focused on developing a value theory. To Smith, different production activities offer different scopes for DoLop. Also, machine inventions appeared to be ‘owing to’ DoLop: ‘common workmen’ using machines could come up with them, or they could be achieved by ‘makers of machines’. The pattern and content of DoLop, or the structure of each country’s SP, are thus where a country’s ability to innovate and develop are rooted. He was not concerned about uneven development because of two assumptions: relatively high transportation costs offered natural protection for lagging countries to learn to catch up; technology could readily be transferred to those countries.

Chapter 1.1 discusses the use of taxes and social health insurance contributions. A key objective of health financing is to redistribute financial resources from the healthy to the sick and from the well-off to the poor. This can be best achieved through compulsory prepayment mechanisms like taxes and social contributions. Key learning includes that

• A high reliance on public revenue raising instruments (taxes and/or social health insurance) is essential to progress towards universal health coverage.

• Large informal economies and poor governance can make collecting public revenues difficult.

• Health financing systems have to be able to adapt to

• – Offset challenges to the revenue base such as economic decline, low levels of economic development or a preponderance of informal employment or economic activity and

• – Meet increasing health care demands which grow with rising expectations and population.

• The traditional distinction between health systems that rely on general taxation (Beveridge or NHS systems) and social insurance contributions (Bismarck or SHI systems) has blurred with time.

• Health systems increasingly rely on a diverse mix of revenue raising instruments to finance health care.

• There is a growing focus on de-linking employment from entitlement to services in historically SHI-based systems and on emphasizing general taxation as a preferred source of revenues.

The chapter examines the two branches of New Trade Theory (NTT). The one spearheaded by Krugman claims lineage to Smith, Marshall, Young and Ohlin. In models that explain trade in a differentiated consumption good, each monopolistic firm’s production involves a fixed cost but nothing there extends DoLop analysis. Expressing his interest in Economic Geography, the modelling of external economies likewise also did little to shed light on DoLop. Though he sought to rehabilitate high development theory, he followed the standard characterisation of less-DCs as having mistakenly adopted import-substituting IPs while resigning to the fact there is nothing in NTT that could yield useful reformulations of those policies. Ethier developed a branch that initially referred to Smith and Young, though for modelling convenience that quickly gave way to multiple yet undifferentiated inputs, with a portrayal of their trade among similar countries. Jones and Kierzkowski were inspired by Ethier to pioneer production fragmentation studies and they even tried to add a dynamic flavour by suggesting possible horizontal aspects of vertical fragmentation, although that has not attracted research interest.

The chapter highlights the major stances in the current round of IP debate. Mainstream economists regard the commercial-policy theory as applicable as ever; an IP may be warranted only when there is a market failure. New Structural Economics argues the same and so do efforts at normalising IP. GVC-researchers seem to be willing to entertain GVC-oriented IPs but remain ambivalent as to which between the concepts of governance and upgrading to emphasise. There are debate participants who play up the importance of external economies across sectors, with some optimistically assuming that linkages will readily be activated, thus leaving hardly any role for IPs. Others pay attention to policy considerations and support the adoption of economy-wide or core technologies. A strong emphasis on interactive learning and TC accumulation facilitated by IPs is found in the NSI and TC literatures. Then there are some who seek to attain broader social goals, including calls for ‘Bringing Production Back into Development’ and employing a ‘production-centred’ focus in formulating IPs. The earlier chapters that discuss efforts at extending DoLop analysis can be regarded as responses to that call.

Health financing is a key component of any health system, but its role is more complex than simply raising and spending money on health. It is a crucial determinant of the overall performance of the health system, defining, among other things, how much money is available to be spent on health and who pays for it, who gets to benefit fromthose financial resources, what services that money can purchase and who ultimately receives resources from the health system as income. Without careful attention to the way health financing systems are designed, incentives for providers or patients can bemisaligned with policy goals, leading to poor health outcomes, financial hardship for users of health care, wasted resources, failure to address inequalities and disruption of countries’ progress towards universal health coverage (UHC) (Box 0.2.1).

Chapter 3.9 Explains how payment mechanisms should respond to the notion of antibiotics as global public goods. Global public goods are goods and services whose benefits are universal in scope. Antimicrobial resistance (AMR) poses a major health and economic threat world-wide, making novel antibiotics a global public good. Payment mechanisms have an important part to play in encouraging crucial research and development (R&D). Key learning includes that

• The antibiotics market is broken. Despite global concerns about the failure of current antibiotics, industry struggles to develop the innovative drugs needed.

• The pharmaceuticals market is patent-centric and does not incentivize innovation. The development pipeline is dominated by redeveloped versions of classic compounds than to developing novel antibiotics.

• National and global incentive programmes are crucial in making the antibiotics market attractive to industry and in prompting the development of innovative, high-priority antibacterial drugs.

• Incentives must address barriers at different stages of the value chain, including the:

• – Scientific stage, for example by splitting the roles of the public and private sector in R&D

• – Regulatory stage, by speeding up approval processes and harmonizing approaches across countries, and

• – Economic stage, countering low commercial rewards compared to other therapeutic areas

• Drug regulatory agencies must strike a balance between rapid approval and ensuring that licensed drugs meet quality, safety, and efficacy standards.

• International coordination is key to reviving the antibiotics market and development pipeline.

Chapter 1.2 assesses community-based health insurance. Community-based health insurance (CBHI) is a voluntary, self-organized approach to financing health care for groups of individuals in the absence of other forms of health care coverage. CBHI scheme members organize themselves; collect and pool their insurance premiums; and use them to purchase health services for members. Key learning includes that

• CBHI is not a miracle solution to affordable access to health care.

• – The very poor often do not enroll, and when they do they tend to use fewer health services.

• – Out-of-pocket (OOP) payments are not necessarily reduced.

• Low uptake, poor delivery of promised benefits and challenges around governance undermine the impact of CBHI.

• CBHI does not overcome broader issues such as a lack of financial resources.

• CBHI might serve as a transitionary mechanism towards UHC and offer some financial protection for the most vulnerable provided that

• – Policy-makers create a supportive political and economic environment

• – Social capital can be mobilized

• – Schemes are institutionalized within the health sector.

The chapter re-examines the works of Mill, Marshall and Jevons. In different ways they extended DoLfg analysis, enhancing its equilibrium flavour. The latter two also attempted to add inputs to the analysis beyond labour. Smith’s DoLop analysis caught their attention, too. Mill gave several examples of such division, showed awareness of the importance of inter-industry connections and alluded to the complexity of learning processes. Marshall and Jevons (in The Coal Question) were likewise strongly inspired by it, subtly admitted its implications for uneven development and referred to England’s trading partners as its ‘tributaries’. Like Smith and Ricardo, Mill employed DoLfg-based reasoning to undercut the case for trade protection. He did pen a qualified endorsement for protecting an infant industry and at no place therein did he incorporate inter-industry connections. Marshall empathised with that endorsement. But unlike Mill, he referred to protection of nascent industries and was aware of the importance of having auxiliary industries properly established and organised. Jevons’ strong admiration of Smith’s DoLop analysis is nowhere to be found in his Theory of Political Economy.

Chapter 2.1 tackles risk pooling. Risk pooling refers to the way prepaid funds are combined and then used to provide care for a covered population. Pooling is an often-underappreciated aspect of health financing which shapes the overall health system. Key learning includes that

• Pooling prepaid funds is central to progressing towards UHC. It bolsters health system efficiency and equitable access to services.

• Pooling maximizes redistributive capacity and allows the health system to align funding with needs and social priorities.

• Having multiple risk pools can be problematic, particularly if

• – pools have too few people;

• – if everyone in the pool has similar risks, and

• – if there is no redistribution of resources across pools.

• Structuring and managing risk pools well can offset problems associated with fragmentation by

• – Reducing duplication or overlap, making purchasing and service delivery more effective

• – Avoiding disproportionately large financial burdens falling on particular pools and,

• – Minimizing risk selection and ‘cream-skimming’ whereby pools try to exclude high-risk (and therefore high cost) individuals.

• Policy-makers can use a range of pooling strategies to enhance efficiency, equity and access but path dependencies and context matter. Options include

• – Encouraging the integration (i.e. consolidation or merger) or coordination of pooling schemes

• – Boosting funding for less endowed pools

• – Equalization through risk adjustment across pools via direct transfers between schemes

• – Making membership compulsory or

• – Aligning data systems, benefit packages and payment infrastructure across pools.