identifies the risks of supplier-induced demand and cost-explosions. He also correctly distinguishes between performance pay within health care units and the general contracting-out of health services to NGOs. While contracting of services though often includes overall performance targets and entails the introduction of staff performance incentives within contracted facilities, this review focuses explicitly only on performance pay elements in health care facilities.<sup>7</sup> Studies focusing on staff-level performance pay in low and middle income countries generally find positive results, but largely illustrate the lack of systematic findings and evidence. (McNamara 2005) discusses overall six cases of payment for quality in the health services sector across developed and developing countries, with cases in Nicaragua and Haiti having had had a positive effect. The Nicaraguan reform efforts though combined decentralization of decision-making authority, increased local accountability with explicit performance agreements, and while being judged to have led to an overall improvement (Jack 2003), it is hard to disentangle the effects of each reform element.

Similarly, in a recent study by (Witter, Zulfiqur, et al. 2011) a pay-for-performance arrangement in a NGO-led health project in the Battagram district of Pakistani was evaluated and found to have improved general services provision, but with an unclear effect of the performance-based elements. The study highlights though the weak link between bonus pay and performance, as well as the low amount of monetary incentives in relative terms.

A study of health care reform efforts in two Rwandan districts shows that the use of performance elements paired with increased autonomy seems to offer a viable and cost-effective way to improve health care delivery (Meessen, Musango, et al. 2006). In a later study, (Meessen, Kashala, et al. 2007) evaluate the performance of 15 health centers in Kabutare, Rwanda. They document a sharp increase in staff productivity after the introduction of output-based bonuses. (Soeters, Habineza, et al. 2006) highlight the potential applicability of the Rwandan experience in sub-Saharan Africa more generally.

Similarly, efforts to improve health services provision in Haiti using performance-based payment for NGOs in a USAID pilot project showed encouraging effects on immunization coverage and organizational behavior (Eichler, Auxila, et al. 2001).

A recent book by (Eichler and Levine 2009) outlines the general argument for the use of explicit incentive schemes in the provision of health services in developing countries. Apart from demand-driven financial incentives through conditional cash transfer programs, they discuss the role of performance-pay and contracting-out of services provision. They review evidence from various contexts, in particular experiences with contracting NGOs in Afghanistan and project evaluations in Haiti and Nicaragua, overall advocating the increased use of financial incentives.

# **_Private sector: Craft or coping jobs_**

Observational studies on performance-related pay in private sector craft or coping jobs are generally suggestive that PRP has a positive impact – but highlights the importance of careful design.

There is a newer and growing empirical literature that has looked at incentive payments in private organizational settings that are closer to that of ministries and departments, characterized by low measurability and low controllability of tasks. These organizational settings are akin to craft or, in some

> 7 (Loevinsohn and Harding 2005) review the success of ten contracting-out projects in the developing world, finding largely encouraging results.

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