# **1 Introduction**

The adoption of the UN Millennium Declaration in September 2000 has committed the international community to a broad vision of development that include not only higher incomes but also enhanced education and health levels, better access to water and sanitation and improvements of other human development (HD) objectives. Achieving by 2015 the ambitious set of the Millennium Development Goals (MDGs) is requiring efforts on multiple fronts.<sup>1</sup> First of all, new data collection and more systematic monitoring are necessary to assess the current situation and recent progress. Although poverty statistics exist for most developing countries, other social indicators – such as mortality, education completion rates, or access to basic services – are not always readily available. Secondly, once the ‘distance’ between the current situation and the various goals can be determined, the costs to cover that distance need to be calculated. Since different combinations of inputs can be utilized to reach the targets and costs depend on which combination is chosen, estimating these costs can be complicated.

In order to assess alternative MDG strategies, the World Bank has developed a framework for the empirical assessment of the costs and benefits of various MDG strategies: the Maquette for MDG Simulations (MAMS). To date, MAMS has been applied in about 30 countries in Latin America, Middle East, and Africa. It is a flexible analytical tool that can accommodate a wide variety of datasets and country-specific circumstances. The main advantages of MAMS include: explicit “production” of various MDG indicators, numerous links from HD service provision to the rest of the economy through the labor market and government budget constraints, and the recognition of potential positive spillovers when multiple MDGs are targeted at the same time.

The objective of this paper is to illustrate these features of the MAMS model and to delineate some general policy lessons by drawing on two recent applications of MAMS to Ghana and Honduras.<sup>2</sup> Five main messages emerge from this analysis. The first is that full MDG achievement is unlikely without a large scale-up of resources, and progress is likely to be uneven across the different goals. The second is that the choice of financing mechanisms—foreign grants, borrowing, taxation—has significant implications for macroeconomic performance and poverty reduction. The third message is that the overall growth environment is key to both poverty reduction and achievement of the non-poverty MDGs, as faster growth increases demand for HD services and creates incentives for attaining higher educational levels. Fourth, scaling up aid (or mobilizing domestic

- 1 At the UN Millennium Summit of 2000, the world’s leaders agreed on the following targets for 2015:

1. Halving poverty and hunger rates (relative to the 1990 rates);

2. Achieving universal primary education; 3. Eliminating gender disparity in education; 4. Reducing by two thirds the under-five child mortality rate (relative to the 1990 rate); 5. Reducing by three quarters the maternal mortality rate (relative to the 1990 rates); 6. Reversing the spread of HIV/AIDS, malaria and other major diseases; 7. Halving the population shares without sustainable access to safe water and improved sanitation (relative to the 1990 rates); 8. Developing a global partnership for development.

2 These applications are available as stand-alone studies—Bussolo and Medvedev (2007) for Ghana and Bussolo and Medvedev (2006) for Honduras—and address broader sets of issues than what is covered in this paper.

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