Decentralization and Governance in Health Care

Abstract

This chapter examines the relationship between decentralization and governance processes. It first reviews the fiscal federalism argument that decentralization will produce positive results both in productive efficiency and in allocative efficiency by establishing more direct accountability and by promoting competition. It then turns to a conventional and narrow definition of governance, the choice of mechanisms through which actions and behaviours of individuals and organisations are governed, and asks how decentralization can be carried out within each governance mechanism. The wider term ‘good governance’ and the impact of decentralization on it is treated next, with the argument that both centralised and decentralised systems can exhibit characteristics of good and bad governance. Three case studies, Spain, Poland and Indonesia, are used to illustrate different aspects of decentralization and governance.