I’m curious how the Effective Altruism community addresses fiscal substitution in the “global health and development” cause area? Do any of the top GiveWell recommended charities find ways to track how their impact applies to government spending in their host countries?
“While donor-driven programs undoubtedly saved millions of lives, they also created unintended distortions in national health priorities.
Many governments in sub-Saharan Africa and parts of Asia actually scaled back domestic health investments, as donor program filled key gaps in HIV/AIDS, maternal and child health, and infectious disease control.
In some cases, domestic health budgets shrank in real terms, even as external funding increased. This phenomenon, often referred to as “fiscal substitution,” led to national health systems that were heavily donor-dependent, externally managed, and vulnerable to funding shocks.
Notably, this reliance emerged despite countries pledged to allocate at least 15% of their national budgets to health.
More than two decades later, only a handful has met this target.” (this is from Redefining Global Health in the 21st Century by Michael John Alastair Reid and Eric Paul Goosby).
GiveWell accounts for government spending through quantitative adjustments for ‘fungibility’ and ‘leverage’, estimating both the probability that their funding alters government budgets and the comparative value of those displaced funds. These adjustments are explicitly included in their cost-effectiveness models. You can go through their spreadsheets and check out their inputs and assumptions.
Fungibility and Displacement: GiveWell evaluates whether philanthropic funding frees up a beneficiary government’s domestic budget to spend elsewhere, or conversely, whether the government would have funded the intervention anyway (the counterfactual).
Counterfactual Value: They assign a rough numerical value to what a government would have done with the money otherwise—estimating, for instance, that general counterfactual government spending is worth a fraction (such as roughly 75% or lower, depending on the specific model and sector) of direct cash transfers.
Leverage Effects: If a grant successfully persuades or helps a government scale up a highly cost-effective program using its own domestic resources, GiveWell attempts to credit that amplified impact to the initial philanthropic investment.
What about new charities?
Charities incubated by the main EA global health incubator, Ambitious Impact (AIM), view government adoption not just as a bonus, but as their primary strategy for massive, cost-effective scaling.
Unlike established organisations that often run parallel to public systems, AIM’s incubation model heavily favours non-profits designed to systematically plug ‘execution gaps’ in public health. Their goal is to build, prove, and hand over the playbook to state and national governments.
Lafiya might be a good example. They distribute modern contraceptives in northern Nigeria through a network of community health workers called “Lafiya Sisters”. They do not view themselves as a permanent, independent health provider; their explicitly stated scaling strategy is to “work with governments to execute, pay for, and take ownership of the model”.
Disclaimer: I knew this info but was feeling lazy so got AI to write it up.
Thank you for taking the time to reply! I’m curious what your prompt was? Before posting here I asked claude the same question and got something that was more confusing to me than your answer.
I’m curious how the Effective Altruism community addresses fiscal substitution in the “global health and development” cause area? Do any of the top GiveWell recommended charities find ways to track how their impact applies to government spending in their host countries?
I found this via Tyler Cowen’s Marginalrevolution.com -
“While donor-driven programs undoubtedly saved millions of lives, they also created unintended distortions in national health priorities.
Many governments in sub-Saharan Africa and parts of Asia actually scaled back domestic health investments, as donor program filled key gaps in HIV/AIDS, maternal and child health, and infectious disease control.
In some cases, domestic health budgets shrank in real terms, even as external funding increased. This phenomenon, often referred to as “fiscal substitution,” led to national health systems that were heavily donor-dependent, externally managed, and vulnerable to funding shocks.
Notably, this reliance emerged despite countries pledged to allocate at least 15% of their national budgets to health.
More than two decades later, only a handful has met this target.” (this is from Redefining Global Health in the 21st Century by Michael John Alastair Reid and Eric Paul Goosby).
GiveWell accounts for government spending through quantitative adjustments for ‘fungibility’ and ‘leverage’, estimating both the probability that their funding alters government budgets and the comparative value of those displaced funds. These adjustments are explicitly included in their cost-effectiveness models. You can go through their spreadsheets and check out their inputs and assumptions.
Fungibility and Displacement: GiveWell evaluates whether philanthropic funding frees up a beneficiary government’s domestic budget to spend elsewhere, or conversely, whether the government would have funded the intervention anyway (the counterfactual).
Counterfactual Value: They assign a rough numerical value to what a government would have done with the money otherwise—estimating, for instance, that general counterfactual government spending is worth a fraction (such as roughly 75% or lower, depending on the specific model and sector) of direct cash transfers.
Leverage Effects: If a grant successfully persuades or helps a government scale up a highly cost-effective program using its own domestic resources, GiveWell attempts to credit that amplified impact to the initial philanthropic investment.
What about new charities?
Charities incubated by the main EA global health incubator, Ambitious Impact (AIM), view government adoption not just as a bonus, but as their primary strategy for massive, cost-effective scaling.
Unlike established organisations that often run parallel to public systems, AIM’s incubation model heavily favours non-profits designed to systematically plug ‘execution gaps’ in public health. Their goal is to build, prove, and hand over the playbook to state and national governments.
Lafiya might be a good example. They distribute modern contraceptives in northern Nigeria through a network of community health workers called “Lafiya Sisters”. They do not view themselves as a permanent, independent health provider; their explicitly stated scaling strategy is to “work with governments to execute, pay for, and take ownership of the model”.
Disclaimer: I knew this info but was feeling lazy so got AI to write it up.
Thank you for taking the time to reply! I’m curious what your prompt was? Before posting here I asked claude the same question and got something that was more confusing to me than your answer.
I can’t remember, to be honest, nothing fancy...