Working Papers,
Lund University, Department of Economics

Abstract: New institutional economics and organizational theories suggest that the choice of institutional arrangements in service provision should be based on the goods characteristics of the services to be provided. The success of any system whether decentralized public sector or private and community-based organizations, depends on the regulatory and coordinator role of the government. Taking the example of Bangladesh the paper argues that the financier role of the government is justified because of the consumption characteristics of the primary health care services and market failures. But the provider role of the government has to be considered carefully keeping in mind the goods characteristics on the production side. The public health facilities in Bangladesh function poorly due to lack of proper decentralization with the result that a majority of the clients seek medical services in the private sector - both for-profit and not-for-profit. The quality and access to these services are far from satisfactory because the government has failed to perform its regulator and coordinator role. The paper points toward the need for research on institutional issues like principal-agent problems, contract formulation and enforcement procedures.

Keywords: decentralization; primary healhcare; NGO's

JEL-codes: I12; I18; I38

20 pages, August 31, 2003

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