Policy Insight, Volume 2, Issue 4, August 2008

Poor countries need development programs that are both effective and cost-effective. To assess effectiveness, researchers are increasingly using randomized trials (or quasi-experimental methods that imitate randomized trials), which provide a clear picture of which outcomes are attributable to the program being evaluated. This Policy Insight discusses the benefits of drawing on the growing number of such studies to perform cost-effectiveness analyses. Cost-effectiveness analyses that compare different interventions or different classes of interventions can give policymakers much more information about what types of development programs deliver the most value. Evans and Ghosh present the results of a cost-effectiveness analysis of education interventions in low-income countries, using it to illustrate the key issues involved in this approach.