A number of countries have decentralized some or all of public health care functions from the
central government to lower levels of government in the last twenty years.1
These reorganizations
typically have involved the national government providing a block grant to local governments, with
the local government then assuming the direct responsibility for the publicly provided health care
goods and services and operation of health facilities in its jurisdiction.
Many studies have examined the structure of various forms of decentralization, but only one
known study has examined the economic efficiency consequences of these changes.2
It is important
to know if decentralization leads to the provision of more or less public good types of health care
goods and services (e.g., immunization, family planning) where at least some of the consumption
benefits accrue to the community at large, or whether governments choose to allocate more or less to
private good types of health care goods and services (e.g., hospital services) which only benefit the
individual who consumes them. Allocative efficiency criteria in the health sector requires
governments to focus scarce resources on public good types of health care and some have argued that
decentralization may actually compromise this goal and reduce societal welfare