# 1 Introduction

Approximately 11 million children under ...ve die each year. Almost half of these deaths occur in Sub-Saharan Africa where roughly one in ...ve children dies before reaching the age of ...ve. More than half of these children –nearly 6 million –will die of diseases that could easily have been prevented or treated if the children had had access to a small set of proven, inexpensive services.<sup>1</sup> Why are these services not provided? While there is no simple answer, a wealth of anecdotal, and recently more systematic, evidence shows that the provision of public services to poor people in developing countries is constrained by weak incentives of service providers –schools and health clinics are not open when supposed to; teachers and health workers are frequently absent from schools and clinics and, when present, spend a signi...cant amount of time not serving the intended bene...ciaries; equipment, even when fully functioning, is not used; drugs and vaccines are misused; and public funds are expropriated.<sup>2</sup> The traditional approach to accountability in the public sector relies on external control. This is a top-down approach where someone in the institutional hierarchy is assigned to monitor, control and reward/punish agents further down in the hierarchy. The tacit assumption is that more and better enforcement of rules and regulations will strengthen providers’incentives to increase both the quantity and quality of service provision. But, in many poor countries, the institutions assigned to monitor the providers are typically weak and malfunctioning, and may themselves act under an incentive system providing little incentives to e¤ectively monitor the providers. As a result, the relationship of accountability of provider-to-state is ine¤ective in many developing countries.<sup>3</sup>

> 1See Lancet (2003) and UNICEF (2003). It is estimated that 2 million children under ...ve die from diarrhea, which in most cases can be treated with simple oral rehydration therapy. Another 2 million children die from pneumonia, where once more there is su¢ cient evidence of e¤ective treatment (antibiotics). Malaria kills one million children under ...ve, most of whom could have been protected by preventive measures and treatment with anti-malarias. Globally, neonatal disorders account for the highest proportion of deaths of children –many of them could have been saved if mothers had had access to basic antenatal and delivery care. Approximately half a million children under ...ve die from measles, for which these is a cheap and e¤ective vaccine (Black et al., 2003; Jones et al., 2003).

> 2For anecdotal and case study evidence, see World Bank (2003). Chaudhury et al. (2006) provide systematic evidence on the rates of absenteeism based on surveys where enumerators made unannounced visits to primary schools and health clinics in seven developing countries. Averaging across countries, 35 percent of the health workers were absent. Banerjee et al. (2004) and Du‡o and Hanna (2005) con...rm these ...ndings. On misappropriation of public funds and drugs, see Reinikka and Svensson (2004) and McPake et al. (1999).

> 3In addition, while well-functioning legal and ...nancial systems can curtail obvious cases of mismanagement, they only partially constrain the discretionary powers of public sector managers and employees. The complexity of the tasks performed by a typical public sector unit and its informational advantage relative to the monitor (which typically relies on accounting data) make it nearly impossible to design legal and accounting measures to address all types of misuse and thus, to curtail less obvious cases of mismanagement (such as shirking, budget prioritization in favor of sta¤ and political considerations). Finally, audit reports and legal procedures are often di¢ cult for nonspecialists to interpret and will therefore go unnoticed unless the commissioning agency acts on them.

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