Institutional Solutions to the Asymmetric Information Problem in Health and Development Services for the Poor

Abstract

Most of the world’s poorest people secure access to essential services by paying for them and thus are in a ‘market,’ whether the services are provided in the public or private sectors. Even the poorest are making payments through these markets. The parties to these transactions are unequal in the knowledge needed to make good decisions, however, with negative consequences for quality. These information asymmetry problems are particularly acute in undergoverned countries, where state regulation and direct service delivery are weak. In these settings it is particularly important to find locally appropriate institutions that will assist service users to use the market to stimulate quality as well as quantity from practitioners. Through a systematic review of literature reviews, this article examines the evidence on solutions to these problems in a variety of professions serving the poor - in agriculture, education, veterinary medicine and especially health - and finds that there are many commonalities in successful institutions between them. The authors conclude that direct payments by clients are more likely to have a positive effect on quality if they are deconcentrated to locally-managed organisations rather than to individual practitioners, particularly if those organisations have an institutionalised history of other - regarding values and incorporate client participation. The likelihood of social institutions that mitigate inequalities in knowledge about the quality of services increase with GNP per capita, education, good governance, and ‘social capital’ while they decrease with inequality and patronage. Because of societal variation in the prevalence of these attributes as well as cultural and political heritage, solutions to the asymmetric information problem generally are country specific. This paper is based on a modified systematic review of surveys of the literatures on mechanisms and institutions of professional service delivery in 4 sectors of low and middle income countries. This article is an expanded version of an article with the same title and authors published in the journal World Development