Lessons from Global Experience for
Successful Decentralization of
Health and Education Services
Jean-Paul Faguet
Anila Channa
London School of Economics
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Outline
Introduction: The state of knowledge about D
Decentralization’s Effects on Health and Education
Ranking Empirical Rigour
Papers Weak and Strong
Summary of Results
Policy Implications
1. Introduction
Decentralization is one of the broadest movements
and most contentious policy issues in development.
• 80% - 100% of countries in the world
experimenting with decentralization (World Bank).
• At the center of reform throughout Latin America,
Asia and Africa; also EU, UK & US.
• Scope of authority and resources devolved: Local
governments spend 10 - 50% of total revenues
(Campbell, 2003)
What is Decentralisation? (Rondinelli, et. al., 1984)
Deconcentration gives limited discretion to field
agents.
Delegation transfers responsibilities to organizations
outside the regular bureaucratic structure.
Devolution transfers power and resources to
subnational units substantially outside CG control.
Privatization transfers functions and assets to the
private sector.
These are not different forms of the same
thing.
Fundamentally different institutional
arrangements
establish different internal incentives
prompt very different behaviors.
This is a conceptual challenge in studying
decentralization.
State of Knowledge
• Litvack et al. (1998): “One can prove, or disprove,
almost any proposition about decentralization by
throwing together some set of cases or data” (p.30).
• Shah, Thompson and Zou (2004): D sometimes
improved, and other times worsened, service
delivery, corruption, macroeconomic stability, and
growth across a large range of countries.
• Treisman (2007): “To date there are almost no solidly
established, general empirical findings about the
consequences of decentralization” (p.250).
Bizarre paradox: After 50 years of policy
experimentation and hundreds of studies we still
know very little about whether D is a good or bad
thing.
Education and Health – Examples
• Positive effects on education provision:
Galiani, Gertler and Schargrodsky (2008), Eskeland and
Filmer (2002), Parry (1997), Barankay and Lockwood
(2007).
• Positive effects on education and health:
Habibi et al. (2007).
• Negative effects on health services:
Akin, Hutchinson and Strumpf (2005).
• Negative effects on education, health, etc:
Crook and Sverrisson (1999), Smith (1985), and Solnick
(1996).
Education and Health
In summary, a large set of positive results re:
education and health services are
counterbalanced by a fewer but still
compelling negative results.
 Hard to conclude whether reform improves
or degrades education and health.
Theoretical arguments for…
Decentralization can…
Arguments for
i. improve information re: local wants and needs
ii.
increase citizen voice and participation
iii.
improve government accountability  responsiveness
iv.
deepen democracy
v.
strengthen individual liberties
vi.
improve economic performance
vii.
increase policy stability
viii.
reduce bureaucracy
ix.
decrease public spending
x.
decrease political tensions and the risk of civil war
“Closer
to the
people”
Theoretical arguments against
Arguments against
i. decrease efficiency in public goods production
ii.
decrease the quality of policy-making
iii.
increase graft and corruption
iv.
facilitate elite capture of government
v.
increase fiscal deficits and hence macroeconomic instability.
Theory provides a strong rationale
Bring government “closer to the people” 
better public goods, more effective
government
• Smaller scale facilitates information,
participation and accountability 
Deepens democracy and lowers costs
• Local homogeneity vs. national
heterogeneity
• Counteract centrifugal forces that cause
political tensions/violence [Spain, UK]
Why don’t we know more?
• Conceptual confusion
 What is D?
 Where is it implemented?
• Non-rigorous empirical basis
 Qual: Small-N and large-X
 Quant: Cross country studies make for
bad comparisons – too much RHS
uncontrolled variation.
• Wrong question: “Is D good or bad?”
Contribution of this review
Conceptual confusion?
Decentralization = Devolution
Non-rigorous empirics?
Classify evidence by X: theme and Y: quality or rigor
of the evidence  Clear patterns emerge.
Themes
(1) Allocative efficiency (preference-matching)
(2) Technical efficiency
(3) Equity
Rigour
Very Strong
Studies with strong research designs that clearly
identify causal effects and successfully address
endogeneity problems.
 Randomized control trials.
Strong
Research that is able to construct a reasonable
comparison group and specifically addresses sources
of endogeneity:
• Panel estimates in a fixed effects model while
controlling for more than one socio-economic
covariate, and more than one covariate from the
health/education production function.
 Quasi-experimental designs such as DID and IV.
Somewhat Strong
Attempts to construct a valid comparison group, but
limited success in dealing with endogeneity.
 Cross-sectional work with matching
 Panel estimations with random effects or between
effects.
 Difference in differences lacking key identifying
assumptions of parallel trends.
 Weaker IVs and fixed effects with limited
covariates.
Weak
Findings based on
• self-selected populations
• no valid comparison group
• omitted variable bias and other endogeneity
problems.
 Most cross-sectional work, especially single
country cases.
Table 2: Rigor in the Evidence
Scale
Allocative efficiency
SBM
Somewhat Strong
Education
Health
SBM
Weak
Education
Health
Generally
Positive
Technical efficiency
Generally Insignificant
or Negative Findings
Generally Positive
Findings
Generally
Insignificant or
-
▪ Hasnain (2008)
▪ Schwartz et al (2002)
-
▪ Treisman (2002)
-
▪ Hasnain (2008)
▪ Freinkman and
Plekhanov (2009)
▪ Di Gropello (2002)
▪ Jimenez and Paqueo
(1996)
▪ Lockheed and
Zhao (1993)
▪ Treisman (2002)
-
-
▪ Eskeland and Filmer
(2007)
▪ Arze del
Granado et al
(2005)
▪ Akin et al (2005)
▪ Asfaw et al (2007)
▪ Robalino et al (2001)
▪ Habibi et al (2003)
▪ Arze del
Granado et al
(2005)
-
▪ Aslam and Yilmaz (2011) ▪ Inchauste (2009)
▪ Freinkman and Plekhanov
(2009)
-
-
▪ Paes de Barros and
Mendonca (1998)
▪ King and Ozler (2000)
▪ Khattri et al (2010)
▪ Parker (2005)
▪ Di Gropello and Marshall
▪ Inchauste (2009)
▪ Khaleghian (2003)
▪ Gunnarsson et al
(2009)
▪ Jimenez and
Sawada (1999)
▪ Sawada and
Ragataz (2005)
Table 2: Rigor in the Evidence
Allocative efficiency
SBM
Very Strong
Edu
cati
on
Health
SBM
Strong
Education
Health
Scale
Technical efficiency
-
▪ Faguet (2004)
▪ Skoufias et al (2011)
▪ Uchimura and Jutting
(2009)
▪ Faguet (2004)
▪ Skoufias et al
(2011)
-
▪ Galiani et al (2008)
▪ Faguet and Sanchez
(2008)
-
-
▪ Skoufias and Shapiro
(2006)
▪ Gertler et al (2011)
▪ Hanushek et al (2011)
-
-
-
-
-
-
-
-
-
-
▪ Duflo et al (2007)
▪ Glewwe and Maiga
(2011)
Rigorous evidence on technical efficiency is favorable.
Decentralization improves technical efficiency in education,
health and SBM. Stronger methodologies show stronger
effects.
Decentralization can enhance service delivery outcomes,
from student test scores to infant mortality rates.
• More studies examine final outcomes, not policy outputs.
Outcomes more likely influenced by exogenous factors.
• Only a few studies explain the channel through which service
delivery improves  Limits policy implications for other
decentralizers.
Evidence on allocative efficiency in health is negative.
Driven by externalities in health sector.
Local governments may match local preferences more
efficiently while ignoring spillovers  This reduces overall
welfare.
But this is surmountable with conditional transfers, or with
decentralizations that retain central control in areas with large
externalities.
Evidence on allocative efficiency in education is positive,
but few in number.
Decentralization  Equity is contingent
Elite capture is evident but by no means dominant.
Conventional wisdom that
Decentralization  Efficiency
Centralization  Equity
is misleading, at least w.r.t. public goods delivery.
Important to understand existing hierarchical social
structures, and then design D reforms around them
to promote participation, accountability, and strong
equalization transfers.
Political accountability and capacity building
dominate as preconditions
Evidence supports strong political accountability
and capacity building as enablers to successful
decentralized service delivery.
Policy Implications (i)
1. Good decentralization should improve technical
efficiency in education and health.
 Better quality and quantity or services
 Better outcomes (e.g. literacy, infant mortality).
2. Good decentralization will increase allocative
efficiency in education. In health too, if D includes
conditional transfers and retained central authority
in areas with large externalities.
Policy Implications (ii)
3. Decentralization  Efficiency and
Centralization  Equity
misleading w.r.t. public goods delivery.
Understand local hierarchical social structures,
then design D reforms with participation and
strong equalization transfers schemes.
4. Political accountability and capacity building
dominate as preconditions. Decentralize down to
lowest levels suited to particular services, s.t.
accountability can obtain. Then build capacity
there actively and passively.
Thank you
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