Decentralization of Health Systems: Decision space, Innovation and Performance

Decentralization has long been advocated as a desirable process for improving health systems. Recently, it has been seen as an integral part of broader health reforms to achieve improved equity, efficiency, quality, and financial soundness. Nevertheless, we still lack a sufficient analytical framework for systematically studying how decentralization can achieve these objectives. We do not have adequate means for analyzing the three key elements of decentralization:

• the amount of choice that is transferred from central institutions to institutions at the periphery of health systems;
• what choices local officials make with their increased range for discretion
• what effect these choices have on the performance of the health system. This paper argues that the principal-agent approach provides a promising way to analyze how decentralization might facilitate the achievement of broader health reform objectives.