ABSTRACT
In the 2004 World Development Report, ‘Making Services Work for the Poor’, public services in developing countries are – for the most part – shown to be deficient, as they are inaccessible, dysfunctional, of low technical quality, not responsive to their clients and stagnant in their productivity. The report argued that, while there are good reasons why full privatisation may not work for many types of service, a few types and perhaps parts of all types can benefit from more market-based incentives for the supply of these services. The private sector was believed to be more flexible, more attuned to the needs of the clients and more innovative. On the other hand, it responds only to purchasing power and not to needs per se, and it typically neglects externalities. So for services that have large externalities, such as dumpsites of solid waste, and services to which access – for reasons of equity or externalities – should not be dependent on client income, such as health care, schooling and waste collection, the private sector by itself would not provide a good outcome. A mixture of public and private actions is then likely to be optimal, but the weights of either partner in this mixture are not easily determined.
