Organization Matters: Agency Problems in Health and Education in Latin America

Latin America spends large amounts of resources on social services, yet its life expectancy and education levels are low compared to other regions with similar levels of income. A key reason is the inherent difficulty of making social services respond efficiently to demands and needs.

Organization Matters shows how improving the institutions that provide those services can make a significant difference in health conditions and student learning. A general framework applying the lessons of institutional economics to the particularities of social services is developed in the introduction. Case studies then assess the impact of institutions on performance in education in Brazil, Venezuela, and Chile, and in health in Uruguay, Chile, and the Dominican Republic.

The authors show that the relationships and rules followed by governments, service providers, and consumers can mean the difference between success and failure. They also find a wealth of approaches, some of them with long histories, that point toward better ways of organizing social services and ultimately improving health and education in the region.

William D. Savedoff is a Senior Research Economist in the Office of the Chief Economist at the Inter-American Development Bank.