Do Local Government Units (LGUS) Interact Fiscally While Providing Public Health Services In The Philippines?

• Date: 01 July 2012
• Published date: 01 July 2012
• Author: Uma Kelekar
• DOI: http://doi.org/10.1515/1948-4682.1233

Volume 4, Issue 2 • 2012 • Article 6

Do Local Government Units (LGUS) Interact Fiscally While

Providing Public Health Services In The Philippines?

Uma Kelekar, Marymount University

Kelekar, Uma (2012) "Do Local Government Units (LGUS) Interact Fiscally While Providing Public

Health Services In The Philippines?," World Medical & Health Policy: Vol. 4: Iss. 2, Article 6.

DOI: 10.1515/1948-4682.6

©2012 Policy Studies Organization

Do Local Government Units (LGUS) Interact

Fiscally While Providing Public Health

Services In The Philippines?

Uma Kelekar, Marymount University

Abstract

ABSTRACT: The aim of this paper is to better understand the impacts of a decentralized

public health delivery system of the Philippines on local government spending. Specifically,

it investigates determinants of local government public health expenditures for the year 2007.

Within the context of the Philippines’ decentralized health system, particular emphasis is given

to horizontal fiscal interactions. The research addresses these issues in an empirical spatial

econometric framework utilizing public finance local government data. A key finding is the positive

fiscal interaction among local governments that is consistent with competition for scarce resources

such as doctors, as well as competition among political actors prior to elections. The policy

implications of these results are also discussed.

KEYWORDS: fiscal decentralization, spatial interactions, Philippines, public health expenditures

Author Notes: I would like to express my deepest gratitude to my advisors Roger Stough, Naoru

Koizumi, Roger Congleton, and Gilbert Llanto for their valuable feedback, advice and support.

Pamela Quizon of Bureau of Local Government Finance and Al Tong of PhilGIS, have been

particularly helpful and prompt in attending to my frequent queries related to data. I would also like

to thank Sidney Carl Turner for his comments. Conflicts of interest: None declared. Corresponding

author: Uma Kelekar. Email: ukelekar@marymount.edu.

Introduction

Historically, policymaking in developing countries has been highly centralized.

These centralized systems emerged out of a strong colonial past or

disenchantment with military rule or dictatorships (in the case of Latin America)

in some of these countries (Asher, Newman, and Snyder 2002). In recent decades,

however, decentralization has been at the center stage of policy experiments in

many developing countries (Bardhan 2002, 1). Countries in Asia, Africa, and

Latin America are increasingly involving lower tiers of government in the

delivery of public services that were earlier a responsibility of the central

governments. Public services ranging from water, sanitation, education, and

health are now provided by local governments in Uganda, Philippine, Nigeria, and

India. While local governments have limited revenue-raising capacity in

developing countries as compared to the developed world, they enjoy substantial

fiscal powers specifically in budgeting and spending.

To better understand the meaning of decentralization, a conceptual

framework of four forms was developed, namely deconcentration, delegation,

devolution, and privatization (Cheema and Rondinelli 1983). These forms differ

in regard to the degree of discretion enjoyed by local bodies. A broad range of

political, administrative, and fiscal responsibilities are transferred from the central

government to regional, provincial, or municipal governments in decentralization.

While deconcentration denotes transfer of administrative authority, delegation

refers to transfer of authority over a specific set of tasks to local bodies such as

state-owned enterprises. Devolution, on the other hand, is the transfer of authority

to local governments that involves transfer of assets and rights, including fiscal

powers of raising revenue and spending.

Health service decision making in developing countries like most public

services was highly centralized with weak administrative capacity at the local

government level (Mills et al. 1990). In the last few decades (1980s and 1990s)

healthcare as a public responsibility has been devolved from national

governments to sub-national governments in many developing countries.1 The

economic rationale for decentralization is mainly to allocate resources efficiently.

Heterogeneous local needs are better satisfied by locally delivered services than

when centrally provided. The reasons for devolving healthcare to local

1 An example of deconcentration is a district-level office of Ministry of Health where the lower-

level offices are bestowed clearly defi ned functions, powers, or responsibility by the higher-level

government. The second form of decentralizatio n is the delegation of government functions to

private secto r groups or non-government organizat ions who act as agents of the national

government. Devolution is that wherein the LGUs are g iven full autonomy and control over

assigned public services. Although they are overseen by the national government, t hey answer

directly to the locally elected officials (Capuno 2009; Mills et al. 1990).

1

Kelekar: Evidence of fiscal competition among local governments in the Philippines

Published by De Gruyter, 2012