Decentralization and service delivery

The problem

• Disappointing health and education outcomes, especially for poor people

Outcomes are worse for poor peopleDeaths per 1000 births

Source: Analysis of Demographic and Health Survey data

Outcomes are worse for poor peoplePercent aged 15 to 19 completing each grade or higher

Source: Analysis of Demographic and Health Survey data

The problem

• Disappointing health and education outcomes, especially for poor people

• Increasing public spending is not enough

Increasing public spending is not enough

* Percent deviation from rate predicted by GDP per capitaSource: Spending and GDP from World Development Indicators database. School completion from Bruns, Mingat and Rakatomalala 2003

Increasing public spending is not enough

* Percent deviation from rate predicted by GDP per capitaSource: Spending and GDP from World Development Indicators database. Under-5 mortality from Unicef 2002

The problem

• Disappointing health and education outcomes, especially for poor people

• Increasing public spending is not enough

• Services failing poor people at local levels

• Resources fail to reach frontline service providers

– Bulky state administrations soak up bulk of the resources

– Leakage: in Uganda, only 13 percent of non-wage recurrent spending on primary education reached primary schools

– Mismanagement: in Nigeria, community health workers often don’t get paid

The real problem for policy:Services failing poor people

The real problem for policy:Services failing poor people

• Service quality is low for poor people

– Bangladesh: Absenteeism rates for doctors in primary health care centers: 74 percent

– Zimbabwe: 13 percent of respondents gave as a reason for not delivering babies in public facilities that “nurses hit mothers during delivery”

– Guinea: 70 percent of government drugs disappeared

The solution: Decentralize?

• Increasing accountability for local services

• Decentralization to locally elected governments—analyzing potential impact within a framework of accountability

Poor people Providers

A framework of relationships of accountability

Poor people Providers

Policymakers

A framework of relationships of accountability

Mexico’s PRONASOL, 1989-94

• Large social assistance program (1.2 percent of GDP)

• Water, sanitation, electricity and education construction to poor communities

• Limited poverty impact – Reduced poverty by 3 percent– If better targeted, could have reduced it by

64 percent

PRONASOL expenditures according to party in municipal government

Source: Estevez, Magaloni and Diaz-Cayeros 2002

Poor people Providers

Policymakers

A framework of relationships of accountability

Absence rate among teachers

Country Rate (percent)

Ecuador 16

India 25

Indonesia 18

Papua New Guinea 15

Peru 13

Zambia 17

Uganda 26

Poor people Providers

National policymakers

Decentralized service delivery

Local policymakers

Poor people Providers

National policymakers

Fiscal issues

Local policymakers

Fiscal Issues

• Expenditure assignments– Loss of economies of scale

– Concurrent responsibilities can lead to duplication, confusion, and evasion

• Financing—tax assignments, intergovernmental transfers, borrowing– Soft budget constraints

– Tax inefficiencies and inequities

– Political distortions in resource distribution

Poor people Providers

National policymakers

Administrative responsibilities

Local policymakers

Poor people Providers

National policymakers

Capacity constraints

Local policymakers

Poor people Providers

National policymakers

Political issues

Local policymakers

Political Issues

• Why do services fail poor people even in democracies where politicians depend upon their support to gain and remain in office?

• Political market imperfections

– Information constraints

– Social polarization

– Credibility of political promises

Do information problems improve with decentralization?

• Voters better informed about local public goods

• Easier to monitor local services

• Easier to coordinate rewards/ punishments when policy dimensionality is reduced

• In Uganda and the Philippines, voters rely on local social networks for information about local govts., and on national newspapers for national govts.

• In Nigeria, uncertainty about fiscal resources available to local govts.

• In India, voters hold state governments responsible for local services

Does social polarization reduce with decentralization?

• Decentralized units more homogeneous

• Some local communities even more polarized (within-village inequality in India very high)

• Local elites find it easier to mobilize and “capture” public resources

Does political credibility increase with decentralization?

• Proximity and reputation breed credibility

• In young democracies, politicians build credibility by targeting their “clients”

• Combination of social polarization and young democracy make local politics particularly “clientelistic”

Political Issues

• Why do services fail poor people even in democracies where politicians depend upon their support to gain and remain in office?

• Political market imperfections– Information constraints

– Social polarization

– Credibility of political promises

• Political Institutions and Electoral Rules

Political Institutions and Electoral Rules

• Non-pivotal/non-swing voters get neglected under centralization (Eg. Bolivia)

• Lower barriers to entry increases political competition

• National political parties determine objectives and incentives of local governments

• Proportional representation and district magnitude more significant determinants of service delivery incentives

Poor people Providers

National policymakers

Transition dilemmas

Local policymakers

EDUCO Program in El Salvador

• Parents’ associations (ACEs)– Hire and fire teachers– Visit schools on regular basis– Contract with Ministry of Education to

deliver primary education

EDUCO promoted parental involvement…

Source: Adapted from Jimenez and Sawada 1999

…which boosts student performance

Conclusion

• Services fail when accountability breaks down

• Decentralization can overcome or exacerbate accountability failures

• Institutional design should address political market imperfections:-- provide more relevant information-- de-emphasize social polarization-- build credibility for public services