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In the past two decades there has been a widespread devolution of authority to local governments around the world. As local governments increase their share of authority and responsibility vis-à-vis central government, their effectiveness in terms of quality, quantity and the accessibility of public services has become critical. Consequently, the effect of local-level corruption on service delivery has critical relevance for development economists and policy-makers.
The Philippines is an ideal place to study the impact of corruption on service delivery. Five years after the democratic revolution in the Philippines, the Local Governments Act of 1991 devolved both political authority and administrative control of many health and education services to the provincial and municipal level. According to some public survey results and anecdotal evidence, much of the corruption in the Philippines does appear to be at the local level. The large number of municipalities, the significant devolution of authority and the high and varying levels of corruption make the Philippines an ideal place to study the impact of corruption on service delivery. Data collected in 2000 from 80 municipalities in the Philippines was used to assess the impact of corruption in local governments on health and education outcomes. The results showed clearly that corruption undermines the delivery of health services. We found a significant partial correlation between 13 dependent variables that measure various aspects of health and education services and corruption perceptions, after controlling for capacity (based on measures of human and physical capital), adult education levels, urban residence, living standards (as proxied by assets), inequality, existence of private sector competition, voting and media exposure, accountability measures and local autonomy.
Corruption levels were measured using corruption perceptions of households and public officials (administrators, health and education services, school principals and health workers). The respondents were asked questions about specific acts of corruption (such as bribery, the sale of jobs and theft of supplies) as well as their general perceptions about the corruption level at each municipal government, public school and public health clinic. Most kinds of corruption were found to be more prevalent in the municipal administrator’s office than in other offices, perhaps due to the administrator’s office exerting more authority and thus having more opportunity to extract rents. A total of 19 per cent of municipal administrators said there were cases of bribery in their offices in the year preceding the survey (1999), while 32 per cent said there were instances of theft of funds. By contrast, the figures for municipal health officers were 2.5 per cent and 16.5 per cent, respectively.To measure the quality, quantity and accessibility of health services, we used seven variables: six of them from a household survey (immunization of children, delay in vaccination of children, patient waiting times, accessibility of health clinics for treatment, choosing public health clinics for immunization, and satisfaction with public health clinics) and one from the Ministry of Health (municipal average of immunization rate of children).
The results showed clearly that corruption undermines the delivery of health services in the Philippines. In each case regression results indicated a significant and negative effect of corruption on the quality of health services. For example, a standard deviation (about 10 per cent) increase in corruption reduces the immunization rate by around 10–20 per cent, increases waiting time in public health clinics as much as 30 per cent, decreases user satisfaction by 30 per cent, and reduces the odds of completing vaccination by four times and choosing public health facilities by a factor of three. The results also suggest that corruption does not affect the rural areas the same way it affects the urban areas. In the urban areas demand for public health care is more ‘corruption-elastic’ (that is, households’ use of public health facilities declines more rapidly in response to higher corruption incidence). Households in rural areas, on the other hand, suffer with more waiting at public health clinics, late immunization of infants, and less satisfaction with public health services as compared to households in urban areas facing the same level of corruption. The presence of alternative health facilities in urban areas, either in the form of private health care providers or other public health facilities, may be the reason for such differences.
We also ran regressions to understand the effect of corruption in rich, middle-income and poor municipalities. Even after controlling for other factors we found that when corruption is endemic, poor and middle-income municipalities report more waiting at public clinics and a higher frequency of being denied vaccines than rich municipalities. Corruption in public clinics is also more likely to deter households living in poor municipalities and forces them to opt for self-medication.
Robustness checks that control for outliers, sample selection problems and reverse causality concerns (for instance, that some common variable is affecting both corruption and service delivery, or that poor service delivery is causing corruption) conirmed our findings.
Taken together our results suggest that corruption undermines the delivery of services in the Philippines. This complements cross-country findings on the subject, and adds to the expanding list of ways corruption undermines welfare.
*Note:
1. Omar Azfar (omar@iris.econ.umd.edu) is a research associate at the IRIS Center of the University of Maryland College Park, and Tugrul Gurgur (tgurgur@umd.edu) is a graduate student at the Economics department of the University of Maryland College Park.
The article sumarizes research conducted by the IRIS Center of the University of Maryland on behalf of the World Bank and the Netherlands Trust Fund. The full report was published as: Omar Azfar and Tugrul Gurgur, ‘Does Corruption Affect Health and Education Outcomes in the Philippines?’, Working Paper (College Park: IRIS Center, University of Maryland College Park, 2004), available at www.iris.umd.edu. The authors thank Satu Kahkonen, Anthony Lanyi, Patrick Meagher and Diana Rutherford for their contributions to this report.
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