This paper examines allocative efficiency changes in government health expenditures in the Philippines before and after its devolution (decentralization) became effective in 1993. Previous studies typically have focused on the choices made by local governments following decentralization, but it is also important to include expenditure choices made by the central level in countries like the Philippines where the central health agency retains a significant role in the provision of health care goods and services. Central level changes in expenditures on public and private health care in response to decentralization can have significant overall allocative efficiency consequences in these countries. In addition, in the Philippines there are two levels of local government below the central level for which substantial responsibility for the provision of health services was decentralized, namely, provinces and city/municipalities. Each level was given specific, and very different, responsibilities and the choices made at each level are important in the overall assessment of changes in allocative efficiency following devolution.
Specifically, the paper addresses three issues: changes in the level and composition of health care expenditures by central and local governments on a total and per capita basis; changes in the share of total local government resources allocated to health by level of local government; and changes in the share of local government health resources allocated to public good types of health by level of local government. The study uses data collected to examine these questions including: i) government audited annual expenditure reports from nearly 1600 local governments for pre- and post devolution years (1992, 1993, 1995 and 1998) collected and encoded for the purposes of this study and never before used to examine these questions; ii) the Philippines National Health Accounts, 1991-1997, which provide annual aggregate pre- and post devolution health expenditures for central and local governments; iii) the 1990 Philippines Census and 1995 Philippines Inter-Censual data which provide indicator variables of population characteristics at the local level for use in multivariate estimations; iv) the 1993 Philippines National Demographic Survey and 1998 Philippines National Demographic and Health Survey which provide an indicator of wealth differences at the local level; and iv) Philippines Statistical Yearbooks which provide additional indicator variables for characteristics of local governments.
