discouraged. Our measures of quality of governance, however, are constructed using citizens’ evaluation of public institutions. Thus these measures may be biased and may capture only the demand side of service delivery. Because of this possible ‘demand-side’ bias, we decide to explore the supply side of service delivery using the data from the public official’s survey.

Our hypothesis is that the quality of governance affects the capacity of an agency to deliver basic services. In particular, the poorer is the quality of governance, the greater the incentives for public officials to abuse their position and the mis-allocation of resources within an agency. Several institutional factors may affect the quality of governance, as, for example, the effectiveness of the institution, the quality of internal rules, or the presence of auditing mechanisms in service delivery and the extent of citizen’s voice.

We move in this Section to explore the other side of the equation and concentrate on the public officials, exploring the link between access and institutional quality of the agency where the official works. In the process, we use the evaluations of the service’s providers – namely, the public officials – to construct our dependent variable, access to service, and the governance variables. Access to services is considered to be a function of governance factors and regional control variables.

In particular, we construct our estimation model by comparing the costs and the benefits associated with the public official’s decision of whether or not to provide a service. Consider, for example, a rent-seeking public official that maximizes his utility and is in the position of choosing for whom to provide a public service. On one hand, the fewer individuals he serves, the larger is the amount of resources available to him for either his personal use or for selling at a higher cost privately to other individuals. On the other hand, the more effective the control mechanisms of the agency are, the smaller the incentive for the official to limit access. Thus, public officials may abuse their position and prevent individuals from having access to public services, when their private gain is greater than their cost of being caught.<sup>16</sup> In an environment characterized by poor governance, the most vulnerable individuals, with limited information and limited access to reporting mechanisms and alternative services, will be the most penalized.

We can synthesize the behavior of public officials as follows. The decision regarding whether or not to exclude a user is a function of (i) the penalty the official will incur into if caught; (ii) the probability of being reported by the excluded user; and (iii) the probability of being caught by a colleague or a superior. These two probabilities are in turn a function of the quality of governance of the institution where the public official works.

All the three elements depend on the quality of governance observed in each agency where the official works. The cost if caught is a function of the rules of each agency. Some agencies may simply charge a fine while others may fire the public official caught abusing her/his position. Thus, the potential loss of salary for the official and how satisfied she/he is with her/his wage will affect the cost of being caught. The higher the wage satisfaction, the higher the loss if caught and the lower the incentives to perform inappropriately at work. The theoretical literature has long emphasized the link between personal incentives and poor governance, suggesting that public officials that receive unsatisfactory salaries may have a

> 16 The cost is the amount that a public official may lose or have to pay if he is caught times the probability of being caught.

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