Leakage of Public Resources in the Health strongSectorstrong An Empirical.pdf

Leakage of Public Resources in the Health Sector: An Empirical Investigation of Chad Bernard Gauthier Institut d’économie appliquée, HEC Montréal Waly Wane Development Research Group, The World Bank Draft: March 16 2006 Abstract In the public sector in developing countries, leakage of public resources could prove detrimental to users and affect the well-being of the population. In this paper, we empirically examine the importance of leakage of government resources in the health sector in Chad and its effects on medication mark-up. We make use of data collected in Chad as part of a Health Facilities Survey organized by the World Bank in 2004. The survey covers 281 primary health care centers and hospitals and contains information on the provision of medical material, financial resources and medication allocated by the Ministry of Public Health (MoH) to the regional administration and primary health centers. While the regional administration is officially allocated 60% of the MoH’s non-wage recurrent expenditures, the share of the resources that actually reach the regions is estimated to be 18%. The health centers, which are the frontline providers and the entry point for the population, receive less than 1% of the MoH’s non-wage recurrent expenditures. Accounting for the endogeneity of the level of competition among health centers, we observe that leakage of government resources has a significant and negative impact on the mark- up of medication sold to patients by health centers. Furthermore, it is estimated that if 100% of public