Accountability, Choice and Modes of Delivery: The Jury Is Still Out
The third type of institutional reforms that attempt to enhance accountability relies on citizen’s choice. In Hirschman’s terms, while participation is about attempting to increase citizens’ voice, these other options are about facilitating citizens’ exit.33 Ideally, citizens will punish bad provider performance when they can exit toward better performers. This can only be done when there is competition in provision, as happens in many countries in service provision in health, telecommunications and, in a more limited way, energy. Competition between public, private and community schools can be enhanced through voucher or competitive subsidy systems, but it will remain unavoidably limited in rural or marginal urban areas where there are few or no alternatives. Direct competition in local water supply is a rare event, as this is normally a natural monopoly.34 The same is the case for roads.
A more limited form of exit occurs when users pay for the services, as they may withhold payment as punishment for bad performance. Pinheiro and Schneider point out in Chap. 2 of this volume to the fact that users of services not paying directly and not knowing that they are paying indirectly through taxes is a major factor inhibiting accountability in hierarchical structures of service delivery. More likely, when citizens have to pay for services, either through tariffs and tolls, or through local taxes, they may have greater incentives to demand accountability, to voice their concerns and participate more actively through whatever available channels, as well as to reward and punish performance through voting. And, consequently, service providers and policy makers may be more responsive to their needs. Several case studies in the GDN project confirmed these assumptions.35 See more on this below in Sect. 4.
Competition in provision, or at least direct payment for services, is often related to service delivery by private firms or community organizations. Private participation by itself may have positive effects of increasing efficiency, but, under lack of competition and weak or inadequate regulation, it can also exacerbate the conflict between principal’s and agent’s objectives, as private company’s bottom line is to increase profits and there is often a strong preference for short-term profits (fast investment recovery ratios). Regulatory and enforcement problems become more technically (and judicially) demanding when private providers are involved. On the other hand, political interference may be significantly reduced.
Finally, competition in provision requires wide public disclosure on information about quality, so that consumers can make informed choices. Regulation by government is also very demanding on information requirements, as already mentioned and highlighted by the Pinheiro and Schneider (2015) paper in this volume.
Evidence from our case studies on differential impacts of modes of delivery (such as whether provision is publicly, privately or community managed) is mixed. While in some countries private or community provision appears to deliver better outcomes, in others they do not.
The study on education in chile and uruguay included in this volume did not find, in general, a robust association between quality outcomes and public or private provision, after controlling for observable individual characteristics, school inputs and governance factors. Specifically, they found a marginal positive association between private schooling and results in science, a negative association between private schooling and results in mathematics and no significant association when assessing reading scores.36 However, private schools tend to have more autonomy and better infrastructure and, through these traits, may lead to unambiguously better outcomes, even after controlling by households and country characteristics.
The colombian study found modest positive effects, on coverage outcomes in water service delivery, of the adoption of business-like modes of provision, whether through a publicly owned utility (a “reformed” utility) or with private sector participation.37
The GDN India and the Burkina Faso case studies in the GDN project found econometric evidence of better outcomes associated with private or community participation in service delivery and citizen’s preference for them, even when the citizens have to pay more. In other African studies, evidence from users’ surveys is mixed: in some of them citizens express more satisfaction with private or community alternatives of provision, though this is not the rule.
These differences in results appear to be associated with the degree of success in promoting competition of alternative providers through quasi-markets, in enforcing adequate regulations on provision of natu?ral monopolies, in clearly delineating roles and responsibilities through concession contracts and in establishing adequate systems of collection of information on costs and quality for regulators and wide dissemination of information on quality for users.38