The Role of Government Policy for Health : Equity versus Efficiency or Poverty versus Fiscal Vulnerability

Abstract

Since the 1980s, many developing countries have been adjusting to severe macro economlc imbalances. There has been a concern that the accompanying changes in fiscal policy may be having a detrimental effect on the health status of these populations. To examine the relationships between changes in fiscal policy and health, a "social matrix" is developed which captures how the equity structure of the fiscal system can influence the efficiency with which health-related inputs are combined. It is the principal conclusion of this paper that household responses to changes in public policy can best be elucidated for a given society when the "social matrix" underlying the structure of the fiscal system is adequately specified. In contrast to other studies which look at poverty or vulnerability in general, this approach draws attentions to those who are fiscally vulnerable, that is, those who are dependent on public subsidies and as a result experience a fall in living standards (full income) when these subsidies are removed.