Efficiency and equity consequences of decentralization in health: an economic perspective

Over the recent years, decentralization has been adopted in many health systems. The question however remains of whether local actors do better than the central government. We summarize the main insights from economic theory on the impact of decentralization and its empirical validation. Theory suggests that the decision to decentralize results from a trade-off between its advantages (like its capacity to cater to local tastes) and costs (like inter-regional spillovers). Empirical contributions point that decentralization results in better health outcomes and higher expenditures, resulting in ambiguous consequences on efficiency; equity consequences are controversial and address the relevance of redistribution mechanisms.