Ethiopia, like most developing countries, has opted to deliver services such as basic education, primary health care, agricultural extension advice, water, and rural roads through a highly decentralized system. That choice is based on several decades of theoretical analysis examining how a decentralized government might respond better to diverse local needs and provide public goods more efficiently than a highly centralized government.
Ethiopia primarily manages the delivery of basic services at the woreda (district) level. Those services are financed predominantly through inter-governmental fiscal transfers (IGFTs) from the federal to the regional and then the woreda administrations, although some woredas raise a small amount of revenue to support local services. Since 2006, development partners and the government have co-financed block grants for decentralized services through the Promoting Basic Services (PBS) Program. Aside from funding the delivery of services, the program supports measures to improve the quality of services and local governments’ capacity to deliver them by strengthening accountability and citizen voice.
Ethiopia’s model for delivering basic services appears to be succeeding and to confirm that services improve when service providers are more accountable to citizens. As discussed in the World Development Report 2004, accountability for delivering basic services can take an indirect, long route, in which citizens influence service providers through government, or a more direct, short route between service providers and citizens. When the long, indirect route of accountability is ineffective, service delivery can suffer, especially among poor or marginalized citizens who find it challenging to express their views to policymakers.
In Ethiopia, the indirect route of accountability works well precisely because of decentralization. Service providers are strictly accountable to local governments for producing results, but in turn, the local authorities are held accountable by the regional and federal governments. A degree of local competition for power and influence helps to induce local authorities and service provides to remain open to feedback from citizens and take responsibility for results. The direct route of accountability has been reinforced by measures to strengthen financial transparency and accountability (educating citizens on local budgets and publicly providing information on budgets and service delivery goals), social accountability (improving citizens’ opportunities to provide feedback directly to local administrators and service providers), and impartial procedures to redress grievances (instituting the independent Ethiopian Institution of the Ombudsman, for example).
Woreda-level spending, financed through IGFTs and supported by the PBS Program, has been a very effective strategy for Ethiopia to attain its Millennium Development Goals (MDGs). Spending on health and education accounts for 80 percent of PBS-financed spending by the woredas, which goes to pay for health extension workers (HEWs) and teachers. Although the link between numbers of personnel hired and services delivered must be treated with caution (and is being explored in detail in another study), this study finds evidence that woreda-level spending in health and education is effective.
Owing to the intervention of HEWs, the use of health services has increased, especially among the poorest quintiles. Every additional US$ 1 of per capita spending by the woredas on health is associated with a 6.4 percent increase in the contraceptive prevalence rate and an 11.3 percent increase in deliveries by skilled birth attendants (two interventions that can reduce maternal mortality dramatically), as well as a 3.6 percent increase in antenatal care (which can reduce infant and child mortality significantly). For education, an increase of US$ 1 per capita in spending by each woreda is associated with a 3.6 percent increase in the net primary enrollment rate within that woreda. Similar results are seen for the pupil-teacher ratio.
Finally, the effect of woreda-level spending on agricultural extension workers is associated with higher yields for major crops, including cereals, vegetables, enset, coffee, and fruit. Spending on agricultural extension workers increases the probability that farmers, regardless of the size of their plots, will use improved farming techniques.
Education, health, and agriculture account for 97 percent of woreda spending, which in turn constitutes 97 percent of PBS-financed IGFTs. This is complemented by support for greater engagement among citizens, improvements in local capacity to manage resources, and better access to information on national and local budgeting and development objectives. While it is difficult to provide precise estimates of the impact of the latter activities, the direction of their effect is clear: Spending efficiency is improved through better capacity, more transparency, and greater accountability to citizens.
In interpreting these results, it is important to bear in mind that the chain of causality from woreda spending to results is direct for education: Spending on teachers directly drives enrollments. For health and agriculture, on the other hand, spending at the woreda level on health and agricultural extension workers is best described as catalytic, because it increases the effectiveness of system-wide spending (federal capital investments in medical infrastructure, for example, or national research to develop improved varieties for farmers). Yet overall, these findings demonstrate the power of the PBS-financed decentralized approach for improving access to basic services, encouraging broadly shared development, and propelling Ethiopia rapidly toward the MDGs.