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Title Fiscal Space for Health:A Review of the Literature
Author(s) Timothy Powell‐Jackson, Kara Hanson and Di McIntyre - Personal Name
Subject Health Economy
Publisher RESYST
Publishing Year 2012
Specific Detail Info Countries the world over are faced with the challenge of finding adequate resources to finance their health system. Increasing attention is thus being given to the question of how to increase financial resources to health- and specifically how to expand fiscal space for health. Fiscal space for health refers to the capacity of government to provide “additional budgetary resources for [health] without any prejudice to the sustainability of its financial position.”There are typically five ways to generate fiscal space in health: 1) conducive macroeconomic conditions, in particular GDP growth and tax revenue; 2) prioritisation of health within the government budget; 3) earmarked taxes for health; 4) external grants for health; and 5)efficiency improvements in the health sector. As is clear from these pillars, while fiscal space may be a relatively new concept, the substance underpinning it concerns issues that policymakers have had to grapple with for decades. This paper surveys the literature on fiscal space for health. One body of literature contains papers and reports that use the language of fiscal space. The second relates directly to the five ways of generating fiscal space for health without necessarily using the terminology of fiscal space. This literature is so wide‐ranging that it is difficult to review. For this reason attention is given to specific themes: 1) ways to increase tax revenue and efficiency in tax collection; 2) how health ministries can make the case for increased government budget allocations to health; 3) the role of absorptive capacity in expanding fiscal space; and 4)the extent to which external aid influences how much governments spend on health. Other recurring themes in the literature are also discussed and comparisons with the education sector are made.A number of key findings are highlighted. First, few studies scratch below the surface to examine how countries have expanded fiscal space for health. Current knowledge on this question is summarised under each of the four focal themes in the main body of the paper. At a basic level, many countries lack the data to build an accurate picture of the sources of financial resources for health over time. This is a prerequisite for understanding what policies, measures, or decisions have been successful (or unsuccessful) in generating greater fiscal space. Empirical work at the country level has tended to be forward‐looking assessments of potential ways to increase fiscal space rather than rigorous examinations of how a particular country has increased fiscal space.Second, much of the literature on fiscal space has tilted towards improving our conceptual understanding of fiscal space. Useful advances have been made in conceptualising what fiscal space means for the health sector and, in particular, how it can provide a framework to assess how to increase financial resources for health. But this often raises more questions than it answers. For example, how does a government increase GDP growth and tax revenues? What factors lead a government to give more priority to health? What is the feasibility and effectiveness of implementing different earmarked taxes for health? Attempts to use improved conceptual understanding to undertake rigorous empirical work remains in its infancy. Third, the literature frames fiscal space either as a macroeconomic issue or with specific reference to the health sector. There is very limited analysis of fiscal space in other sectors, such as education (see Section 4). It appears that the health sector has been quickest in realising the relevance of fiscal space, perhaps because there is an impression (justified or not) that health spending has historically been lower than required in developing countries.Despite the challenges of conducting a literature review of this nature, a number of knowledge gaps and future avenues for research emerge. These include: 1) country experiences with innovative domestic financing tools for health; 2) in‐depth study of how a country has achieved sustainable increases in health spending; 3) cross‐country analysis of the main sources of growth in health financing; 4) country level analysis of the main sources of growth in health financing; and 5)a cross‐country analysis of how responsive government health spending is to the macroeconomic environment.
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