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a blog from young economists at Nova SBE


Old-age poverty in Germany

Does Germany have an old-age poverty problem?

A comment to an interview of a 74 year old pensioner who lives in poverty

From a German student who passes an exchange semester at NOVA

Poverty is much more than a current topic in Germany as most of the people could imagine. This blog entry is dealing with an interview of a 74 year old German pensioner who has worked full-time for over forty years in her life and lives in poverty now. Furthermore, I’ll show information about the German pension system and explain the reasons why this woman isn’t an individual case.

The person:

Ms. Apel gets 637€ of pension to complete her daily life each month. With this amount of money she isn’t able to buy new clothes or even to buy fresh food every day. She goes to second hand shops where the clothes cost less than one euro or takes the help from food banks to be alive. This situation doesn’t allow her the choice to go to the doctor or to do something special – even to visit her children in Germany who live in other cities.

Old – age poverty in Germany:

Many German who worked for their whole life and paid their contributions for their pension are living in poverty now. They are alive, but this life doesn’t allow them to have a happy pension time. The circumstances of counting the own money every day, to look for the prices in every situation and of having an uncertain future don’t allow them to be a part of the normal society. This people even avoid places and also the contact to people who have a normal, average income.

The German pension system:

To give a short and better understanding, the German pension system works like this: The employees pay a monthly percentage of their income during their working time, for the people who are actually pensioners. They have to pay and have no other choice because it’s required by law. Finally, the employees have a right to get a pension if they become pensioners and they will get the money from the employees who are working then.

Demographic change:

The German population looks like this chart:

Image

Most of the people belong to the age group between 40 and 64 and they’ll get their pension at the age of 67 normally. We can imagine that Germany will have most of the problems after 2030, when these people get their pension and “my generation”, who counts less than then, has to pay for them every month. Our pension system will have insufficient money for all pensioners at least to enable them to have a carefree life, like Ms. Apel. For example, if this people have a gross income of 2500 euro each month and have worked for more than 35 years, they’ll get less than 700 euro pension each month. Most of them will live in a bigger poverty than Germany can imagine right now.

Results:

Germany’s outdated pension system needs a big change to avoid the old-age poverty which will come as fast as we can think about. We also need more volunteers who care about poverty than our government does, which is still closing its eyes about this important topic. Furthermore, every person in Germany is responsible for their own pension too. A private money plan could be one solution for each person in the future while they are working. But people like Ms. Apel need help from the government right now, maybe in the form of material objects like clothes or food if it can’t give money for them.

If we take a look at the GDP per Capita in Germany, this country belongs to these whom are above the GDP per Capita Europe average. We associate countries in east Europe like Bulgaria as poor normally. But as we can see through this interview: The importance of poverty reached even in Germany – and will be one of the main problems to fight against in the future!

 

written by Immanuel Block

Sources:

The article: http://www.spiegel.de/international/germany/a-voice-from-the-elderly-poor-in-germany-a-855608.html (09/13/2012)

Pictures:

http://1.bp.blogspot.com/-n7q9KOSEiVw/TbHzm8lmxuI/AAAAAAAAAi8/FaZnr7hRXfI/s1600/GermanPopPyramid2011.GIF

http://iuwest.files.wordpress.com/2011/03/eu-gdp-per-capita-2010.jpg

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Access Time to Health Care for Rural Newfoundland and Labrador

The provision of public health services to rural locations is an area of interest for policy makers, especially in my home province of Newfoundland and Labrador where almost half the population live in rural areas. Many factors in the history of the province have contributed to this urban-rural divide including attempts by the government post-confederation to relocate the rural population to more urban centers, and more recently in 1992 with the collapse of the cod fishing industry. In the decade following this collapse, rural population declined by 18% and what followed from a health care perspective is a highly dispersed rural population competing against urban centres for the allocation of health resources[1]. In a report profiling rural Newfoundland and Labrador, the Government of Canada concluded:

Residents of rural and small town Newfoundland and Labrador are clearly not equivalent to their urban counterparts with respect to economic prosperity, educational attainment, housing, and access to health care (…) decision makers should recognize the range of conditions across the province when drafting policy and implementing programs[2].

Residents in rural Newfoundland are four times more likely not to have a doctor compared to urban counterparts[3]. For rural habitants, access time to medical services is higher as they face longer traveling time for appointments and other health services. This leads to varying demands for health care between rural and urban residents, since rural residents may decide not to seek care after factoring in explicit and implicit costs associated with travel.

Without increases in efficiency or technological gain, in order to decrease the access time for rural areas the supply of health care must increase. Increasing the supply comes from increasing the number of health professionals directly in the region or by allocating more resources (hospitals, clinics, etc.) to the area, also increasing the supply of professionals. The provincial government offers incentives for workers to relocate to rural and remote areas. Grants, increased incomes, and other benefits are offered to physicians, nurses, and other health professionals in exchange for their commitment to work in rural areas. Even with incentives, common barriers to nursing in rural areas include the lack of services and resources, diminishing population and isolation, shortage of professionals and increased workload, and decreased opportunity for professional development[4].

Budgeting and other constraints impact the ability to provide comprehensive health services across the province. Taking into account the higher cost for workers in rural areas, the distribution of health professionals across the province must be balanced in such a way as to reach the maximum number of patients while ensuring reasonable access time. As the population of rural Newfoundland decreases, health infrastructure such as hospitals and clinics are consolidated in more urban regions. Although resources are in place to offer all residents essential services, major procedures or treatments can only be done at specific locations with the right equipment, located in urban regions.

Access time to health care adds additional dynamics to deriving the demand for health services and efficiently allocating health resources. Through policy measures such as incentives to increase the supply of health professionals and the allocation of health resources across the province, the government is able to impact access time for rural residents. With high rural populations, public expenditures on health must be balanced to ensure all residences are covered. The challenge comes with balancing the distribution of health professionals between urban and rural areas while meeting budgeting constraints and reaching the most patients possible.

Jacob Macdonald -60-
Nova SBE

[1] Higgins, Jenny. 2008. Depopulation Impacts. http://www.heritage.nf.ca/society/depop_impacts.html (Accessed Sept. 20, 2012)

[2] Government of Canada. 2005. Rural Newfoundland and Labrador Profile:  A Ten-year Census Analysis (1991-2001).  Ottawa, Ontario

[3] Mathews, Maria and Alice Edwards. 2004. Having a Regular Doctor: Rural, Semi-Urban and Urban Differences in Newfoundland. Canadian Journal of Rural Medicine. Vol. 9, Issue 3 166-172

[4] Aylward, Mark, Alice Gaudine and Lorna Bennett. 2011. Nurse Recruitment and Retention in Rural Newfoundland and Labrador Communities: The Experiences of Healthcare Managers. Online Journal of Rural Nursing and Health Care. Vol. 11, Issue 1 (Spring): 54-69


Poverty in Italy: the need for an immediate growth

Filippo Galli,1192

Poverty is the pronounced deprivation of well being, people cannot satisfy their basic needs due to lack of income to buy services or to access to them. This is the definition of poverty and in Italy, this situation is growing quickly and worrying.

I can’t speak about the poverty without relying on real and precise data as those of Istat (national institute of statistics).  Actually, Italy presents a troubling situation caused by some careless choices, that I am going to illustrate in this work.

The latest data coming from Istat refer to year 2011. 

I would start from the dramatic situation of the population: the eleven percent of Italian families lives in relative poverty conditions, I’m talking about 8,1 million people; on the other hand the five percent of families lives in absolute poverty conditions, more or less 3,4 million people.

Two other relevant data are the following: the first is that the relative poverty line for a family of two persons is € 1011 per month, while the second one is that the difference between Northern Italy and Southern Italy is more and more marked. In fact the situation in the South of Italy is even more dramatic and widespread, just think that a family of four is poor, (about 23,3 percent), and that the eight percent lives in absolute poverty conditions. In this situation the lack of resources available to the individuals is so deep that the life is in a danger or, at least, is led in desperate conditions.

Signs of deterioration can be observed, however, among households without any employed or including retired from work, families with no income from present or past work activities, for which the incidence of poverty is 40.2% in 2010, rising to 50.7% in 2011.

Nowadays Italy is a country characterized by a deep inequality, and this is demonstrated for example by the average monthly expenditure for a poor family: in Northern Italy the average monthly expenditure amount to 827 euro, in Central Italy 802 euro and finally, in the South 786 euro.

Although these data are worrying, the real problem is that a situation like this was to be expected.

In the last four years we have seen a threefold decline: first the purchasing power has decreased of 11,8 percent; second the unemployment rate increased dramatically, especially the youth’s rate, and finally, too few economic investments are made to solve the serious problem of unemployment. In conclusion, from my point of view the weak point of these data from Istat is the main social safety net: the family.

Signs of the worsening of the situation can be observed, however, in the families without workers or retired, that is without any income coming from working activities, present or past; for these families, the incidence of poverty was 40,2% in 2010 and grows to 50,7% in 2011. Three-quarters of these families live in Southern Italy, where the relative incidence goes from 44,7% to 60,7%. The rise  of poverty involves also families whose members are retired (from 8,3% to 9,6%); 90% of these families members are lonely old people or couples of olds; a slight improvement among the families in which there are only retiring pensions incomes, is observable only where the pension income can support the economic weight of the not working members, allowing them not to look for a job (from 17% to 13,5%).

According  to this view some families spontaneously organize themselves to better manage their low incomes, organizing agreement enterprises to get facilities in buying, or to organize the offer/demand of work. Many Onlus (organizations no profit for social utilities) are growing, showing that there is a different ethical and cultural way of managing hard economical situations, besides the Government actions.

 

 Data taken from : http://www.istat.it , and from a newspaper ( “corriere della sera”).


How the inequality of the quality of life measures changed

In the course of industrialization, poverty – and especially relative poverty due to rising income inequalities – became more visible and thus more important in poverty research. New social classes evolved and the „social question“ arose. It was the first time that misery affected a huge part of the population and people moved to urban areas making poverty even more visible. 

But this picture changes if we do not only consider a unidimensional approach using income but also consider a multidimensional measurement taking account of differences in features such as lifetime expectancy, stature or literacy. 

Comparing the income data from developed countries such as England, we can see that the income inequality clearly rose. Using the Gini coefficient – with OECD data after taxes and transfers – we see that the index increased from around 0.26 to almost 0.35 in the last 30 years. But other factors actually narrowed. The twentieth century contrasts sharply with the record of the two centuries before and in every measure of those mentioned above the gains of the lower classes have been far greater than those experienced by the population as a whole, whose overall standard of living has also improved. Even if those indicators are significantly correlated with income and Gini coefficients, the anthropometric measures reveal important aspects of welfare. 

If we analyze data before and after industrialization, we see that the difference in the stature (referring to the height) of a person between rich and poor people diminished from 3% to only 1%.  The data for the preindustrial difference are taken from a study comparing the stature of simple English soldiers, considered to be poor, with the stature of Sandhurst cadets, which were trained at an elite military school and thus considered rich. To compare the difference in modern society the same study analyzed data from the former social classes I (professional) and II (intermediate) with the classes IV (skilled manual) and V (unskilled manual). As stature is an indicator for the health environment and nutrition of a person we can see that the living conditions of poor and rich people must have assimilated in some way. This is supported by the fact that especially an increase in height is due primarily to improvements in socioeconomic conditions rather than to genetic factors.

The change in the difference between poor and rich is even bigger if we analyze life expectancy. The life expectancy in preindustrial England of the poorest testators was only 33 at birth, compared to 39 for the richest. The poorest testators in this study were consider to be the ones leaving less than 25£, the richest leaving 1.000£ or more. This leads to a difference of 18% in the 1790´s and 1800´s which diminished to 9% when we look at data from 1997-2001 comparing social class I with social class V.

The most extreme change can be seen if we analyze the literacy rate of people. In preindustrial England the difference between poor and rich people was 183% if we use the same data for comparison as for life expectancy. This difference diminished to 14% in modern England if we analyze the percentage of persons not achieving entry-level literacy of social class V. 

Thus the life prospects for the rich were markedly better than those for the poor in the preindustrial era. In terms of the general life prospects of the rich and the poor, therefore the Industrial Revolution seems to have narrowed the differences even more than would be suggested by measures of income distribution alone.

 

Julia Seither


Poverty in European Union

When I look to the perspective of poverty in Europe, with the financial and debt crisis, my concerns about the European Welfare State increase. The European Union has registered increasing unemployment rates in the last years (from approximately 7.3% in 2008 to 11.3% in August 2012[1]), 8% of the active population lives in poverty[2] and 22% are in risk of becoming poor[3].

The financial crisis caused an increase in the number of bankruptcies and unemployment rates. The governments are increasing taxes and cutting social expenditures in order to solve the debt crisis and reduce the deficit (the goal is to achieve a deficit of 3% until 2015). The European Union, in the last years have reduced the aid to Member Countries, ending with some programs as, for instance, the European Programme of Food Aid to the Most Deprived Persons[4] (PEAD) that benefits more than 18 million people in the European Union.

In a Europe with part of its Member States in crisis and straighter in its measures, the anti-poverty measures may decrease or be transferred to second plan. With the adhesion to the Euro, devaluation of currency is not possible, so, in order to decrease debt, governments are decreasing salaries and social charges – as a method of internal devaluation – which leads to a reduction of internal demand. What is happening in these in-crisis countries is that these policies are affecting more the low and medium classes, decreasing its welfare. If these measures were addressed to wealthier population by, saying, increasing taxes on higher income, the effects on private expenditure would not be as large as in the first case and we could benefit from the multiplier effects of the measure.

What should be, then, the role of The European Union? Should it be supportive of the austerity measures in order to reduce countries’ debt; or should it have a more social role by increasing or at least maintain aid or push national governments to do it?

Poverty brings not only economic questions, but also social ones. Poverty, besides decreasing productivity and efficiency, increases discrimination and exclusion, which concentrate poor people and creates a vicious poverty cycle.

The European Union should refrain its role in fighting poverty: instead of reducing aid, (the total non-crisis EU-27 average aid of the percentage of GDP decreased from 1.1 to 0.6[5], almost to an half), governments and The European Union should be more efficient in the distribution and application of subsidies and aid: one cannot forget that almost one quarter of the European population is in risk of poverty or social exclusion. The southern EU-27 countries are in crisis and the eastern countries are still recovering from previous regimes. The European Union should then impose targets and measures to these countries in order to avoid social conflicts and promote at least the minimum standards of living to all of them.

Concluding, in order to not increase poverty and avoid development reversals, the richest and poorest countries in the European Union should unify resources and improve the management and allocation of aid and funds applied to poor people instead of reducing them.

 
 
Dalila Figueiredo


[2] Poverty is measured with the threshold of 60% of income

[3] Font: Eurostat

[4] The program consists in releasing public intervention stocks of agricultural products to Member States wishing to use them as food aid for the most deprived persons of the Community.


Some aspects of measuring and comparing homelessness in Europe.

A mix of factors have made homelessness and housing deprivation extreme examples of poverty and social exclusion in all countries in Europe. Some well-known causes amongst others are a lack of affordable housing, low paying jobs, domestic violence and mental illness. As access to affordable housing of good quality is a fundamental need and right, member states face a significant challenge in ensuring that this need is met. Therefore, and as its multi-dimensionality is acknowledged, the elaboration of common definitions and indicators is an important requirement for understanding the pathways and processes that lead to homelessness (EC, 2010).

As in 2005 few official statistics on homelessness existed, and as the few existing ones were rarely comparable, research was conducted within the frame of the Community Action Programme on Social Exclusion to provide tools to improve the knowledge of homelessness and housing deprivation (CAPSE, 2007). Generally, three key questions need to be answered to collect data that is comparable:

  • How do we define the different situations where people may live?
  • How do we define homelessness in a consistent manner?
  • How do we decide what data needs to be collected?

A main reason for the lack of comparability of existing data on homelessness and housing exclusion were the different definitions that were employed both across and within European countries’ departments or governments. As measurement normally occurs at one point in time it is difficult to capture some aspects of homelessness as people can move in or out of homelessness over time because being homeless can be caused by a range of factors. Therefore six distinct categories of homelessness were presented (Table 1). While the first 2 categories clearly indicate a group of people that are homeless, the third category groups people that are defined as homeless in some countries and ‘at risk of homelessness’ in others. The use of these categories and according definitions can however help to make data comparison possible. 

Table 1: The six operational categories of homelessness (CAPSE, 2007)

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To make comparison of key variables possible, they should be conforming across the countries. The minimum core data-set should include:

  • Demographic characteristics (age and gender)
  • Nationality and migration background (country of birth)
  • Composition of homeless households
  • Accommodation situation (immediately before service period and at time of data collection)
  • Duration of (current) homelessness
  • The reasons for (last) homelessness

Without going into detail it should be mentioned that data collection according to the different categories of homeless can be done in several ways, e.g. street counts of people sleeping rough, surveys and client register systems. According to CAPSE (2007), the only robust ways of obtaining statistical information are however via surveys and street counts, as part of the homeless are not in contact with services at all. On the contrary, Williams (2010) argues that headcounts of rough sleepers also present problems. A main one is the problem of undercount. One of the causes for this is that people sleeping rough who have prior knowledge of the count tend to hide or move on during enumerations. Another cause is the lack of knowledge or experience of enumerators.

Three distinct measures can be used to describe homelessness and they can have value for different policy purposes: Point in time, Flow and Prevalence. The point in time is an indicator that can be used to assess the need of emergency hostel provisioning, flow information can help to evaluate preventive strategies and prevalence can be useful in estimating the need for support services.

References

Community Action Programme on Social Exclusion (CAPSE) 2007. Measuring homelessness in Europe. Policy Studies-Findings 8. ISSN 1830-5423

Williams, M 2010. Can we measure homelessness? A critical evaluation of ‘Capture-Recapture’. Methodological Innovations Online 5(2), 49-59.

European Commission (EC) 2010. Decent housing and homelessness. http://ec.europa.eu/employment_social/2010againstpoverty/extranet/housing_en.pdf (September, 2012)

Author: Tom Willaert


Thor Bach Krarup Jensen: Robert “Dry your eyes Denmark”

 

 

Since the 10th of September there has been a lot of hype surrounding a Danish welfare recipient called Robert Nielsen. He appeared on national television on Sunday the 9th of September, explaining that he has been a welfare recipient since 2001. He would not have a “Bad job (e.g. cleaning toilets)” which was the only jobs he thought was made available to him by the job centers. This resulted in that Robert Nielsen for the last two years have not had a job, and he would like that to continue. For the last 11 years he had only had two jobs. As he says in the article in Jyllands Posten (Danish Newspaper):”I must admit, that I’m doing less to find a job than other people, because I don’t need the identity that comes with a job to be happy”.

 

This statement has created a lot of hype in the Media, and on the different Social Medias (Facebook/Twitter) in Denmark. The general public is stunned about Robert Nielsen’s attitude towards life. The general wondering is why others should pay for his life, just because he does not need an identity through a job. Robert replies by saying that it is the way the Danish system works. If he had the choice between a “Bad job” where he is being threated unjustly and being a welfare recipient, he would prefer to be welfare recipient.

 

Who is Robert Nielsen? Robert Nielsen (Lazy Robert) is actually spokesman for the Nihilistic people’s party. This party’s members are characterized as provocative artists, self-centered narcissist with the need for media exposure. Robert Nielsen position as leader of this party, can explain way he need to be provocative and create hype about his person and daily life.      

 

The politicians are now reacting to this case, and are looking at the social welfare system in Denmark. Robert Nielsen is unfortunately not a single case, other middle-aged man from Copenhagen can tell a story very similar to Robert’s. An independent think tank called Kraka found, that 240 people have been receiving social welfare for more than 10 years, based on official figures from the Danish Ministry of Employment. These 240 people are stated to be ready to work by the Danish Ministry of Employment, and have no mental or physical illness. This brings us to an estimate of 240 people like Robert Nielsen in Denmark. 

 

This is a very bad situation for the current Danish government, and is a very big contrast to the countries struggling with poverty. Denmark is, together with the Netherlands, one of the countries with the lowest poverty rate, with a poverty rate of 13.4%. But it does not mean that it is a country without internal problems.

 

One way of tackling this situation is by looking at employment effort by Danish Ministry of Employment. They need to set stronger demands to the employment meetings that people like Robert Nielsen need to attend to receive social welfare.  The unemployment offices need to be more effective and strict to ensure that we don’t end up with social freeloaders like Robert Nielsen. Today the demand by the employment office is to hand in two applications for a job each week, but there are no restrictions in terms of where in the country and which type of job you should apply for. This means that you in purpose can search for jobs not fitting your profile and in a different part of the country, so the change for getting a job interview is very small. This procedure need to be changed. The unemployment offices should demand more specific applications fitting to the personal profiles and geographical areas.

 

Of course the Danish Ministry of Employment has to change some of their central procedures, but it is also a question of a personal mindset. Robert Nielsen represents some values that I have very hard to recognize, and values which I think should not be idealized. It is important that you minimize the number of social freeloaders in a country, so everybody is contributing to the Danish welfare society. The social welfare should be applied for people how are not cable of having a normal job, because of mental or physical illnesses.        

 

Written by Thor Bach Krarup Jensen, Nova School of Business and Economics   

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Health care products and consumer goods

In order to understand how the pharmaceutical market operates it is crucial to distinguish health care goods from regular consumer goods. In fact, there are some parallels. Both satisfy the demand of consumers. They feel a need for e. g. food, social interaction or pain reduction, and make use of their purchasing power to satisfy those needs. But is it really that simple? Looking at demand, first differences appear. Unlike many consumer goods, like shampoo, which are purchased regularly, health care goods are sometimes not demanded at all. In the case of perfect health, many consumers do not enter a pharmacy for months. Sick patients on the other hand have a very stable demand for health. In life-death situations it can be even completely price inelastic. For instance, a patient who depends on a daily insulin injection will have a steep demand curve for insulin. Price increases will not affect his buying behavior since his life depends on it. Also cancer patients will use the drugs their doctor prescribed them since some diseases have no alternative treatment.

At that point, another difference adds to the reasoning: The choice of the health care good is not always done solely by the patient itself. Doctors, therapists, nurses etc. make recommendations or prescriptions. Sometimes their decision is the only choice for the patient. In FMCG, there are much more alternatives. Many brands compete for our attention when, for instance, buying a chocolate bar. In order to prevent an information overload and in order to make decisions quickly, we often stick to our favourite brands. Since these goods are fast moving, i. e.g purchased on a regular basis, we develop a high brand loyalty. Prescriptive health care goods do not confront the consumer with that issue.

What is more, many consumer goods are the actual items which deliver the desired performance. A shampoo has the ability to wash hair. Health care products on the other hand work in combination with the patient – the patient produces health over time together with the health care product. Also, the patient is able to produce health partly alone by doing sports or choosing a healthy diet and thus preventing diseases.

For the health care industry, e. g. the pharmaceutical industry, all that implies a different approach in marketing the goods. The stable demand and high price inelasticity can assure high profits. On the other hand, advertising activities are limited as regulations and law limit the promotion of drugs. As the purchase decision is often made by a third party, e. g. the doctor with his or her prescription, product choice also seems to be an issue. FMCG companies are trying to gain the consumers trust and building a positive brand image whereas many patients do not even know which company manufactured their drug.

Summing up, comparing health care products to traditional consumer goods is very interesting. It shows us, the consumers, how our purchasing decision is made in a different way when it comes to health care.

Tomasz Pierog


Are patents blocking Health Care innovation ?

Pharmaceutical Industry may be described ambiguously as innovative but also guilty for blocking innovation when patents and trademarks enter the scene. Are the high profit patents involved in the commercialization of new health care solutions (drugs, medical devices, even empirical knowledge or molecules) fare?

Since we were born we have been confronted with social and media pressure towards such organizations, acclaimed hazard and cause of negative economic and political influence (e.g. many Hollywood movies are based in this fact) sustained by lobbies and recurrent scandals  .

Such corporations rely their business on a strategy of impetuous R&D in order to overpass their direct competitors and enjoy the benefits conceded by the trade related aspects of intellectual (or physical) property rights, rather than primary target ethical and social care since they are profit organizations.

The existence of rewarding patents serves a meritocracy system for innovative ideas and physical developments, but the question that arises here is how to define this plan and how to correctly implement a system that does not harm who invests but should not at the same time overprotect it.

Currently, a development in ‘fields of technology’ is granted by 20 years of enforceable public interests[1] which is converted in a stimulus for R&D, but at the same time prevents physicists/scientists from accessing to innovative patented materials/methods – this problem of obstructing innovation is entitled “anticommons problem”[2].

In the specific case of Health Care we can see such repercussions worldwide as the development of a new drug that for example fights cancer will be protected by a 20 year range and grants the owner a uniqueness point of sale worldwide; while this procedure representing an innovative treatment should directly be administrated in public hospitals and supported by public taxes it arises one important question:

Why should people pay higher costs in order to convert previous R&D investment into huge revenues for patent owners?

From my point of view it is important to redefine this limit.

Concerning the Portuguese case, the 2 main areas of health expenditure are oncology and AIDS, areas where it is visible the existence of a monopolist competition caused by differentiated products that are perceived (and stated by medical studies) as better treatments for such pathologies and can be figured by the following numbers:

– 53% of oncology treatments is delivered by Roche and Novartis – market value of 225 MM €

– AIDS treatment is half provided by three drugs: Truvada; Herceptin and Kaletra; representing a market value of 197 MM €

Both values are partly subsidized by universal taxes and compete against other laboratories that provide different treatments (observably the supply of cutting edge treatments is not targeting everyone).

There is in the Portuguese market a new trend of centralizing purchases in order to reduce total spending which implies that hospital administrators must choose one alternative.

While screening the treatment protocols; one of the most important factors is its price. As we cannot find generics or other producers with similar drugs appearing in these markets it delivers all the binding power for the supply side. This is a mere example of an industry that is highly protected by patents that forces tax payers; hospitals and users are paying more than what the price market should be in a regulated market (where differences in some cases are disturbing).

My final suggestion goes towards the regulation of this market based on a reallocation or an adjustment of the premises used to compute the economic calculus of compensating patents.

One reduction on time like releasing the patent after 10 years and other producers/users of the development would have to pay a fee to the patent owner, this fee would suffer a gradual reduction over the years in order to grant surplus for innovative ideas but at the same time not struggling the market and not discarding social and health care. The war for patents would exist still and the system would obviously compensate the ones who innovates (e.g. exemption or reduction on taxes), but the economic calculus to compute the protection granted should be urgently revised.

André Oliveira Martins

Sources:

–          WTO Report 2010

–          2000 Panel Report: Canada – Patent Protection of Pharmaceutical Products.

–          “WTO TRIPS implementation”International Intellectual Property Alliance. Retrieved 22 May 2012.

–          “Hospitais incapazes de baixar custos com medicamentos”. Jornal de Negócios. Retrieved 2 March 2012

–          www.news-medical.net


[1] Article 27 and 33 of General Agreement on Tariffs for World Trade Organization

[2] R&D is inhibited by the presence of many intellectual property owners’ exclusive and possibly conflicting rights over devices and methods needed to perform R&D on biomedical products.


The German Health Insurance System

Currently, there is a dual health insurance system in Germany, comprising both a public and a private insurance. The insurants can choose to join a public insurance company (of which there are around 150 and which offer most medical goods and services) and – if they want to – insure special issues like teeth replacement with an additional (private) insurance. Alternatively, they can also handle their complete health insurance in the private sector.

Before discussing the system, I will shortly present some more facts about the system:

Starting in 2009, the government aimed to increase the competition between public insurance companies in order to slow down the increase of health expenditures. Therefore, a central authority called ‘Gesundheitsfonds’ was established which collects the insurance premiums from the insurants. Hence, insurants do not pay their contributions to their insurance company. Rather, the central authority distributes all premiums to the insurance companies in a way to equalize differences due to health characteristics of the insurants. It is to be noted that one common premium rate (currently 15,5% of income) was decided upon for all insurance companies. If an insurance company needs more money, it has to demand an additional premium. On the other hand (as is the case nowadays), companies can also reimburse parts of the premiums if they build up reserves. Thus, the competition between the insurance companies was intended to increase (as could be noticed by an increased number of mergers in this sector).

Unlike the public insurance system, private insurance companies demand premiums independent of the insurants’ income. Rather, premiums depend on a couple of factors like gender, health status, age at entry. As this system is not based on solidarity in the context of an intergenerational contract, parts of the premiums are dedicated to build up provisions for one’s retirement (where less income is generated by the insurants but the demand for health care increases).

In an international context, the German system is not unique. Rather, similar systems exist in the Netherlands, Belgium and Israel. However, this system has triggered a lot of critique centering around the development of a two-class society. Critics claim rich people get a preferred treatment (e.g. shorter waiting-time) and elude the general principle of solidarity with socially disadvantaged people on which the German welfare system usually is based. Questions of fairness and societal solidarity have been raised. Supporters of the private system, however, point out that for many years it was only the private system that worked well from a financial perspective and did not run up deficits.

From a technical perspective, there is a discussion about the appropriateness of the risk-adjustment schemes to distribute insurance premiums in the public system.

 

Sources:

http://www.bmg.bund.de/ministerium/english-version.html  (German Ministry of Health and Health Care)

http://www.spiegel.de/wikipedia/Gesundheitssystem_Deutschlands.html

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Child Poverty

The 19th September 2012,

 

On May 29th, 2012, the Innocenti international research centre of Unicef published the report “card 10” . It shows the conclusion of a survey which measures the evolution of poverty in the world’s wealthiest countries. Unfortunately, the results are quite alarming: for 35 countries they recorded 30 million children who still live below the poverty line. In order to determine the poverty threshold, Unicef used two methods.

 

They started by defining the poverty lines as 50 per cent of the adjusted median income in each country. It measures the percentage of children living in relative poverty. Thus, it represents the children who stand significantly behind the others. It is a real problem because these children are so far below the other children that they don’t even think they deserve to enjoy the privileges of living in a rich country. Romania, USA and Latvia appear to be the worst in this category with respectively 25.5, 23.1 and 18.8 per cent of their children standing below the poverty line. The countries where we can find the lowest rates are Iceland and Finland with 4.7 and 5.3 per cent. However, this method highlights the relative poverty inside the country. For example if the rates of Hungary or Slovakia are lower than UK, Italy or USA it is because the difference between the average income and the median income is lower in Hungary and Slovakia.

 

Therefore, Unicef also indentifies poor children according to an absolute poverty measure. They established 14 basic items that every child must have: three meals a day, at least one meal a day with meat, chicken or fish ,fresh fruit and vegetables every day, books suitable for the child’s age and knowledge level, outdoor leisure equipment, regular leisure activities, indoor games, money to participate in school trips and events, a quiet place to do homework, an Internet connection, some new clothes, two pairs of properly fitting shoes, the opportunity, from time to time, to invite friends home to play and eat, the opportunity to celebrate special occasions. A child is perceived as deprived when he misses 2 or more of these items.

 

Here the disappointing countries are Italy and France who are both standing above the 10 per cent of deprived children. Nevertheless, it is interesting to notice that countries with the same economic development as measured per capita incomes may end up standing far from each other. For instance, Belgium and Denmark are close in incomes but Belgium has a rate of poor children of 9.1, whereas Denmark has a rate of only 2.6. It means that the policies against poverty are very different in these countries. Countries like Belgium, Germany, Portugal, France, Italy, should be able to do better and take effective measures.

 

Finally, this report shows that child poverty is a very important topic. Children are our future and we can not afford to neglect them. Indeed, it is a fact that children who live in a poor surrounding are more likely to suffer from social problems later. For instance, they are more likely to fall into drug and alcohol abuse.. That what makes child poverty a good indicator of a country’s development.

 

In conclusion, child poverty is a real matter even in rich countries. But we and our governments are able to do something about it. And we have to because they are our present but also our future.

source : http://www.unicef.org.uk/Latest/Publications/child-poverty-uk-statistics-report-card-10/

 

Jérôme Lucchese


On risky behavior and fate in Africa

THE following thoughts recently crossed my mind as I raced through a dirt road in Mozambique at way too much speed, in the company of 30 people (not including children, live animals and dead ones too) in the back of an old Mitsubishi Canter designed to transport… well anything except people:

1. What the heck am I doing here?

2. Do these people have any love for their lives?

I am still to come up with the answer to the first question concerning the situation I was in, but regarding the last one I will try to sketch a possible answer in the following paragraphs.

Call it braveness or naiveness, Mozambicans and Santomeans engage in much bigger risks more frequently than anyone I know. In particular, I have been amazed by drivers there (excess speeding in bad awful road/weather conditions) and public transportation conditions (overcrowded vehicles all long overdue a full inspection). I was also amazed that some hazardous behaviors affect not only the person involved but her loved ones too – for example when putting immense responsibility in children (over siblings, travelling alone, handling knifes, etc.) or engaging in risky sexual behavior in high HIV prevalence environments. But my amazement was not echoed besides in foreigners like myself, for all this – including the deaths originated by such perilous behaviors – is taken as rather trivial there.

These observations lead me to think that, in Africa, professor Pita Barros’ class survey to infer the value of a statistical life (i.e. the value of saving an anonymous life) would reach much lower values, even when adjusting for income and other factors. There is simply lower willingness to pay, I suspect.

I do not wish to pass judgment over sporadic events I have witnessed. But maybe… Are they unfortunately not so infrequent?

Some selected statistics (Angola was added for further reference):

– HIV incidence[1]: high.

Rate of HIV incidence (ages 15 to 49)

Source: Joint United Nations Programme on HIV/AIDS (UNAIDS), 2009 estimates.

And the inverse relationship is found in condom use.

Condom use during higher-risk sex

Source: Joint United Nations Programme on HIV/AIDS (UNAIDS), 2009 estimates.

– Road traffic deaths: high by world standards.

Road safety

Estimated road traffic death rate per 100 000 population.
Death rate: dark green: <10; light green: 10.1-20; yellow: 20.1-30; orange: 30.1-40; red: 40.1-50; grey: not applicable; white: no data.
Source: WHO, 2006-2007.

– Treatment of injuries: weak.

Age-standardized mortality rate caused by injuries

Source: WHO Data – World Health Statistics, 2004 estimates.

So why not:

– use more the condom?
– drive more responsibly?
– act more careful in general?

Why did I see the inverse, even in educated well off adults?

Perhaps…

– Because the value of a statistical life (VSL) in Mozambique and São Tomé and Príncipe is low? or

– Because of lower life expectancy and/or lower income? (And VSL need not be lower if one controls for this then.)

Lucky for me two researchers came to Novafrica’s first annual conference held this month and explained their take on this subject: regarding African travellers, yes, average VSL is low (close to zero!) even when controlling for income, life expectancy, lack of information about transport risks, liquidity constraints, etc. Their main explanation for this is “socio-cultural factors, and especially the perceived role of fate in determining life outcomes”. Indeed they estimate much higher VSL’s among non-Africans (!) in their sample “who report comparable incomes to African respondents yet are much more likely to avoid additional fatal accident risk (…)”[2].

The authors also shed some light onto another question posed here, pointing out that “the accounts of African fatalism have gained particular relevance (…) in explaining the rapid spread of HIV, and (…) in accounting for the risky sexual behaviors that underlie this spread.”

In conclusion, my observations seem to be only the tip of a giant African iceberg after all. Personally I tend to agree with the authors “socio-cultural differences” explanation. And despite (or because of) these puzzling aspects, those differences are why I will keep travelling to Africa.

Helena Afonso


[1] Data not available for São Tomé and Príncipe and Portugal in 2009.

[2] Léon, Gianmarco and Miguel, Edward: Transportation Choices, Fatalism and the Value of Life in Africa. Forthcoming.


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Microcredit

Microcredit is a concept which was invented by Muhammed Yunus in 1976 in Bangladesh. His goal was to expand the banking services for the rural poor in India, who are not able to borrow on the normal banking market. This money should allow them to build small independent organisations and as thus, escape from poverty. In order to implement this concept, Yunus founded the Grameen Bank. In 2006, Yunus and his Grameen Bank received the Nobel prize for peace.

Microcredit assumes a positive thought, namely that poor people also are capable of setting up and leading a (small) business, for example selling milk or eggs in a small village. By lending them money and not giving it, they are not seen as needy, but instead they are given a chance. This fosters their self-image and belief in theirself. This is contrary to the “standard” developing aid, where poor people don’t get the chance to do it themselves. The idea is that this should foster important economic variables such as employment rates, income, investments, … . These resources, in  turn, could then be used to set up even more important projects, such as education and health. All these factors improve the well-being of the poor. According to the Grameen Bank, 97% of the loans are given to women. This makes them clearly the biggest target of the Grameen bank. In this way, the position in society of the women ameliorates. This is still a big problem in some developing countries.

So far, this sounds a great solution to solve a part of the problems related to poverty. Nevertheless, there are also a lot of problems when implementing microcredit. At first sight, microcredit uses a low interest rate. This is not the case, however. Microcredit makes use of the “flat interest rate method”. This method charges interest on the total loan, without taking into consideration that the periodic payments reduce the amount loaned. Because of this, interest rates are much more higher than normal standards and some people refer to microcredit as predatory lending. Clients are not informed about this interest rates, and don’t possess the knowledge to know more about it. Next to this, corruption is also very common in developing countries. Some dutch sources also state that there are too many intermediaries, and the loans are wrongly applicated (for unproductive things, like repairing a roof). This raises some questions about the true objectives of the ones who supply the loan and the working method of microcredit. A key solution probably can be found in a better regulation and supervision by governments and international organisations like the World Bank. This is not the case so far. We can ask ourselves why this hasn’t been introduced yet.

Next to this, I would like to add a word about the discussion whether microcredit is a better solution than development aid. Proponents of microcredit argue that it rises economic efficiency and projects are seen on a long-term basis. The ones in favour of development aid argue that they can develop bigger projects better than the local population because they have more knowledge. Why can these two concepts not be complementary?

By Jeroen Ducheyne- Exchange student

sources : 

www.grameen-info.org

http://www.nobelprize.org/nobel_prizes/peace/laureates/2006/

http://www.happynews.nl/2009/05/19/microfinanciering-verbetert-maatschappelijke-positie-vrouw/

 http://en.wikipedia.org/wiki/Flat_rate_(finance)

http://cpi.transparency.org/cpi2011/results/


Poverty is all around!

Before I took part into the Poverty Course at NOVA, I thought poverty is mainly a topic in Africa or even outside Europe. But after I recognized that poverty is all around – in Europe, in Portugal , in Lisbon-, I started to get a better view for it. To give an example, if we use 60% of the median income as the poverty line, after taxes and transfers 18,5 % of the people in Portugal are poor!1 I mean the people, who live in all these old houses in Lisbon, which look like if they will break down in the next moment, they do not live there because they want, it is that they do not have the chance to find a better and of course cheap flat somewhere else. The people, which are incredibly thin and ask for money because they hadn’t had food for the last 3 days, are they really telling the truth? But when I give money to this poor people, what are they buying from it? Food? Alcohol? Drugs? Maybe we should just buy an extra apple in the supermarket and give it to the old lady sitting next to it? Shall I feel sad about this people? I live in a really nice flat. I had never to ask myself how I can get money for the food for tomorrow. I went to school and now I am studying and I am able to study a semester abroad. Is this unfair or is it the own fault of these people that they are poor? Of course there are exceptions, but as I learned in the poverty course, many people try their best and are poor anyhow. Many different determinants have to be taken into account, when we look at why a person is poor or not. Does the family has depended children? Is the head of the family a man or a woman? How good is the education or at least do they have any? Are they falling into poverty after escaping it? To be honest, in my opinion it makes no difference if it is their own fault or not -No one really wants to live on the street and beg money from other (richer?) people…

written by Linda Klöcker – Exchange Student Master Economics

1 OECD, http://stats.oecd.org/Index.aspx?DatasetCode=POVERTY

Child Poverty in Rich Countries: Report Card 10

Child poverty or child deprivation is a world-class important issue. Child poverty is highly associated with other important issues for a person in a society such as impaired cognitive development, behavioral difficulties, low level of health, low level of education achievement, low skills and aspiration, welfare dependence, and drug and alcohol dependence, etc.

In order to help prevent this, UNICEF has created “Report Card 10” which brings information about child poverty rate as a critical indicator of how well countries are doing. Specifically, this report card looks at the child deprivation level and compare them across countries to generate a child deprivation index. A child is considered to be in poverty if he or she lacks 2 out of 14 items that are considered basic needs. This could be for example, having 3 good meals a day or having a place to do homework.

Although the index varies across countries, it reflects how well the country is doing or how wealthy the country really is. Consider two countries that have the same level of income per capita ($25000 a year), in this case, Czech Republic and Portugal. Portugal has about 3 times higher child poverty rate than Czech Republic does. This makes a huge difference in terms of wealth of a country. Moreover, the index shows how many children are living in the poor family relative to their own society and how far they are from relative poverty line. A child is considered to live in relative poverty when he or she lives in a family who cannot afford basic needs (food, shelter, healthcare and clothes) comparing to others in their society. This is different from absolute poverty which considers a child to live in poverty when he or she lives in a family who cannot afford minimum basic needs comparing to a fixed cutoff point. UNICEF mentions that relative poverty is a true poverty because it reflects a standard that changes over time and depicts how a child experiences poverty.

In terms of government aspect, the index also measures government’s performance as well as government’s spending on child poverty problems such as transfer on child protection efforts. Therefore, it shows government’s commitment and effort to solve child poverty problems.

UNICEF encourages the European Commission to have this report every year instead of every 3 to 4 years in order to monitor child poverty closely. Having a close monitoring will certainly allow for an evidence-based policy, effective and efficient allocation of resources, and a more informed advocacy.

Report 10 card is a good example that reflects great organizational effort that UNICEF has put together to protect children’s future. However, child deprivation is not a problem for a single country nor it is to be managed by a single organization. It is everyone’s issue and requires collective efforts and commitment at organizational, institutional and international level. Therefore, it is time for us to take this issue seriously and contribute our commitment and effort to solve child poverty problem to plan a better future for our children and society.

 

Panida Phusapan