Working Paper - Dov Chernichovsky

NBER Working Paper No. 8470
Issued in September 2001
NBER Program(s):

Improved health, equity, macro-economic efficiency, efficient provision of care, and client satisfaction are the common goals of the health system. The relative significance of these goals varies, however, across nations, communities, and with time. As for health care finance, the attainment of these goals under varying circumstances involves alternative policy options for each of the following elements: sources of finance, allocation of finance, pay to providers, and public-private mix. The intricate set of multiple goals, elements, and policy options defies human reasoning, and, hence, hinders effective policymaking. Indeed, health system finance' is not amenable to a clear set of structural relationships. Neither is there a universe that can be subject to statistical scrutiny: each health system is unique. 'Fuzzy logic' and its underlying 'Expert System' that model human reasoning by managing knowledge' close to the way it is handled by human language, provides a powerful tool for systematic analysis of health system finance, and for guiding policy making. Assuming equal welfare weights for alternative goals, and mutually exclusive policy options under each health-financing element, the exploratory model we present here suggests that a German type health system is best. Other solutions depend on the welfare weights and mixes of policy options.


The conventional wisdom says that because the cost of health care for the aged is more than that of the young at any time, there is a positive relationship between the aging or higher life expectancy of the population and aggregate health care spending. It is difficult, however, to find evidence to support this argument. We present a simple framework that shows how aging of the population may not necessarily increase the total cost of medical care over time or be observed across nations. This follows because numerous other factors that change with aging affect cost of care in ways that are not age-neutral. Such factors include age-specific shifts in morbidity and mortality, growth in income and insurance coverage, rising levels of education and changing technology. Consequently, the relative medical costs of the aged may indeed increase, at least for demographic reasons. Simultaneously, however, the costs of the young may decrease for the same reasons. The Israeli experience, used as a basis for a cursory empirical discussion of the issues, supports the line of reasoning presented in the paper. Copyright © 2003 John Wiley & Sons, Ltd.


The purpose of this paper is to estimate the level of consumption of food and of nutrients for the Indonesian population; to identify population groups with nutrient deficiencies, to identify the major sources of different nutrients, and to estimate income and price elasticites of demand for both food and nutrients. The survey data indicates that serious deficiencies in all nutrients exist in Indonesia and that the problem is more one of maldistribution than of an overall shortfall in the availability of foods, tending to affect the poorer households. The importance of rice as a contributor of most nutrients is striking. A household utility-maximization model is used to derive the household's demand for food and hence nutrients. For estimation purposes the double-logarithmic function is used. The paper concludes that there is wide scope for nutrition policies based on changes in incomes and relative prices, as food and nutrition consumption respond rather dramatically to such changes. The data also suggest that, although inadequate diets are a greater problem among poorer households, they are also prevalent among the better-off and better-educated. Alleviating malnutrition in Indonesia is a matter of nutrition education as well as one of raising incomes.

  • Country: Indonesia
  • # Pages: 71
  • Publication Year: 1978
  • Type of Media: Scientific Report


This paper evaluates the Profamilia's outreach effort of 1986. Profamilia is an affiliate of the International Planned Parenthood Federation and provides more than 60 percent of Colombia's family planning services. This paper focuses around the question of Profamilia's ability to provide more protection with the same resources. The authors found that: (i) operations tend to be constrained by limited personnel and supplies; (ii) the labor costs and unit costs of contraception are lower in the outreach and clinical programs, which can be expanded with available infrastructure; (iii) the clinical and outreach program is the least cost-effective because of the higher cost of sterilization; (iv) more resources should be targeted to areas where there are proportionately more mothers and where people are better educated; (v) experienced and married workers sell more in the outreach program than their junior unmarried colleagues; and (vi) in both the clinical and surgical programs, output would increase if there were proportionately more nurses and fewer doctors.

  • Country: Colombia
  • # Pages: 113
  • Publication Year: 1991
  • Type of Media: Scientific Report
Dov Chernichovsky, Uri Spiegel, Uri Ben Zion, and Mark Gradstein

Dov Chernichovsky is affiliated with the Department of Health Policy and Management and the Program for Health Policy in Economies Under Stress at the Ben-Gurion University of the Negev in Beer-Sheva, Israel. Uri Spiegel is with the Interdisciplinary Department of Social Sciences at Bar-Ilan University, Israel, and the Department of Economics at the University of Pennsylvania in Philadelphia, Pennsylvania, USA. Uri Ben Zion is affiliated with the Faculty of Industrial Engineering and Management in Technion, Haifa, Israel. Mark Gradstein is with the Department of Economics at the Ben-Gurion University of the Negev.


The supply of food is no longer a major determinant of malnutrition in the developing world. Rather, a lack of purchasing power, ignorance about nutrition, and subjective tastes or preferences prevent some households and individuals from securing adequate diets. Some households spend more on food and other consumer items than would be needed for a minimum balanced diet. Yet they remain malnourished or have nutritionally undesirable diets. Food subsidies and income transfers have been major policy options available to governments to augment household purchasing power and change consumer preferences in order to alleviate malnutrition. Those options have traditionally addressed the problem by considering one critical nutrient and one common staple. The model discussed here provides and demonstrates a solution to the question: What is the combined optimal income-transfer and subsidy programme that would meet particular nutritional requirements with the least budget expense to the government? It is argued and shown, with the aid of an initial model, that a combination of income transfers and food subsidies that consider a range of foods, rather than a single staple, and a range of nutrients, rather than a particular nutrient, may lead to cost-beneficial policies that meet wider nutritional objectives for less cost.


The supply of food is not a major determinant of malnutrition in the developing world. Rather, it is a lack of purchasing power of some households (and nations) that prevents them from securing adequate diets. This is one of the most important conclusions of the recent World Food Summit [1]. This view has been held for more than two decades [2].

In the classical articulation of the diet problem, Stigler [3] concluded that malnutrition is more than a problem of insufficient income to purchase enough food. Indeed, many households, especially in developing economies, probably spend more on food and other consumer items than would be needed for the minimum required diet. Yet many of them remain malnourished, in part because of ignorance about nutrition and in part because of subjective tastes or preferences that may lead to nutritionally undesirable diets.

Consequently, “ignorance” and “tastes” must be considered explicitly in food policies and programmes that in most instances attempt to modify human behaviour by changing incomes and relative prices in the short term, while relevant health education takes root [4].

Price subsidies and income transfers have been major policy options available to governments to augment household purchasing power and alleviate malnutrition [5]. Both income transfers and subsidies, largely confined to a market economy, are, however, innately problematic in that some “leakage,” i.e., support to some “wrong” people and for some “wrong” commodities, is inevitable. In spite of these shortcomings, income transfers and subsidies have major attractions. Compared with the alternatives (e.g., feeding programmes), subsidies and transfers are most effective [2]. They also rely on market rather than on administrative mechanisms. This makes them appealing in developing economies where the share of the market economy is growing but administrations may still be weak.

Through presentation of a basic model, we seek to outline the key parameters involved in the answer to the question: What is the optimal combined price subsidy and income-transfer programme that would meet particular nutritional requirements with the least budget expense? This issue of optimizing and minimizing the total amount of income transfers and subsidies has become especially significant as governments try to reduce their budgets as part of economic structural adjustment efforts.

To start answering the question, we follow earlier work by Reutlinger and Selowsky [2]. Similar to that work, we focus on “market-wide” subsidies and “target-group-oriented” income transfers. We deal also with the same parameters: income and price elasticities to capture consumer behaviour, and income distribution to capture the policy environment. The model also follows empirical research looking into the determinants of household food consumption and nutrition [6]. We depart from the work of Reutlinger and Selowsky and from common policy programmes in several ways. First, we attempt to deal with optimal combinations, from a fiscal perspective, of the alternative policies rather than viewing them as mutually exclusive options. The view that pertinent policies and programmes are mutually exclusive is also evident in the concluding remarks of the review of these policies by Pinstrup-Andersen [5]. Second, we consider a vector of nutrients rather than just one or two. Third, we deal with all foods rather than just with a particular item. A “single-nutrient, single-food” approach may be outright detrimental; it may induce consumption of, say, calories at the expense of some critical vitamins that may be ignored [7].

This paper should be viewed as part of a more general effort to develop a model that would consider optimizing income transfers and subsidies from a nutritional perspective under a variety of budgetary, production, and foreign-exchange constraints [8].