1999 Reports

Asymmetric Information and the Role of NGOs in African Health Care

Leonard, Kenneth L.; Leonard, David K.

In African health care the "miracle of the market "has not occurred. Patients exhibit willingness to pay for health care and yet practitioners are unable to sell their services. Simultaneously non-governmental organizations (NGOs) are running successful health facilities for which patients are willing to pay. We develop a model of the demand for health care in the presence of asymmetric information that allows us to view African health care in the framework of the New Institutional Economics literature. We use previously published empirical results to support the validity of this view and show that NGOs have the institutional capacity to deliver high quality health care, whereas private practitioners, even with good intentions, will not easily succeed. Having arrived at the well documented conclusion that NGOs provide high quality services through theory allows us to draw policy conclusions on ways to extend the provision of health services.