infant mortality by three‐quarters and under‐five child mortality by two‐thirds. Investments in clean water and sanitation also help support cognitive development of children by providing a disease‐free environment, reducing instances of malnourishment and increasing learning. Unlocking these benefits requires devoting greater resources to water and sanitation, specifically in rural areas, which tend to receive less than 10 percent of total financing. More emphasis should also be placed in improving water and sanitation in schools and health centers, where the risk of disease outbreaks is greatest. Finally, governments must adopt monitoring systems, set targets, and develop their human resources to deliver services efficiently.

**Good governance.** The prerequisite for making effective public investments in health, education, and water and sanitation is good governance. In the absence of adequate governance, the efficiency of government spending is decreased as public resources may be diverted from their developmental objectives toward dubious alternative uses. Good governance enables a government to set goals and monitoring systems to track the performance of investments, and enables policymakers to allocate resources where they are most needed. Governance also needs to be fostered at the level of social service providers. As discussed above, the quality of service delivery is enhanced when providers face the right incentives to do their work well, adopt monitoring systems to track their own performance, collect input from the people they serve, and undertake actions with the goal of achieving improvements in human development outcomes.

The key to better governance is accountability. Mechanisms that strengthen: the accountability of the government to citizens (such as elections); the accountability of providers to government (for example, performance‐based contracts); and the accountability of providers to citizens (such as community participation in service provision) can all lead to better governance and more effective investments in human development. The upcoming 2017 World Development Report on _Governance and the Law_ assesses the approaches to institute “good enough governance.”

# **_Insure—Policies to reduce vulnerability to risk_**

The first two components of the 3‐point strategy focus on generating opportunities for the poor to utilize their most abundant asset – labor – and improving the returns to this asset through investments in human capital. But this is often not enough to end extreme poverty. Too many of the world’s poor are stuck in circumstances where they cannot take advantage of the opportunities brought by labor‐intensive growth. This includes individuals who are old, sick or disabled; those who are stuck in remote and poor regions; and also individuals who face discrimination due to gender or ethnicity. Even in countries that have managed to greatly reduce poverty through growth, like China and Thailand, deep pockets of poverty remain among minority populations and in remote areas. In Latin America, one out of five people are classified as “chronically poor”, a condition that often spirals into intergenerational cycles of poverty. Moreover, countries that have made significant strides in poverty reduction can experience setbacks. Households may face adverse shocks – such as illness, poor weather, or natural disasters – pushing them back into poverty.

As a result, the objective for this third component is to assist the destitute and protect the vulnerable, through an emphasis on three priorities: social assistance, social insurance, and protection against pandemics and large‐scale natural disasters. The extent of adoption of these priorities should match a country’s specific situation. Social assistance will be most valuable for countries that continue to experience deep forms of chronic poverty; social insurance is most helpful for successful developers as a means of preserving their gains; and finally, protection against pandemics and natural disasters 39