NGO provision of health services in rural Uganda either complemented or undermined government capacity, depending on the supply of skilled labour
In the past twenty years, NGOs have become one of the main delivery agents of foreign aid to poor countries. Many poor populations in sub-Saharan African countries today rely on NGOs as the main source of basic community services. The rise in the importance of NGOs has been accompanied by a rise in scrutiny and criticism. A central concern is that despite good intentions, NGOs compete with the government over scarce resources (Easterly 2003). This concern has been very salient in public health. Observers worry that government efforts may be hindered by NGOs that offer higher wages and attract (“poach”) the limited number of skilled workers away from the public sector. In the health sector of sub-Saharan Africa, NGOs often offer salaries that are five to twenty times higher than those provided by the government, along with superior non-wage benefits such as access to vehicles and improved working conditions (Pfeiffer et al. 2008, Koch and Schulpen 2018). Farmer (2008) states that “The NGOs that fight for the right to healthcare by serving the African poor directly frequently do so at the expense of the public sector by luring nurses, doctors, and other professionals from the public hospitals to ‘NGO land’, where salaries are better.”
In principle, NGOs can crowd out as well as crowd in government capacity. On the one hand, NGOs may poach government workers when the supply of skilled workers is limited because they offer higher wages. On the other hand, when the supply of skilled workers is abundant, and poaching does not take place, the entry of NGOs can increase the supply of willing government workers as well as the demand for government services by educating the local population about the benefits of these services. Thus, the net effect of NGOs entering local communities is ambiguous, and in our work (Deserranno et al. 2023), we study the following questions: Does NGO entry crowd out or crowd in government-provided services? If there is a crowd out, is the poaching of government workers an important underlying mechanism?
Background
In our research (Deserranno et al. 2023), we explore these questions in the context of the provision of basic health services in rural Uganda. The country’s infant mortality rates are among the highest in the world, and in recent years, the government has been working to expand access to healthcare. The Ugandan government began a new programme that enlisted volunteer health workers to make home visits to people in their villages. These workers offer health education, postnatal checkups, basic medical care/medicines, and referrals to health clinics when necessary. At the time, the government was able to recruit health workers in only half of the villages; in the other half, it was challenged by limited supply of willing and able workers. Roughly a year later, a large NGO introduced a similar programme in which local villagers provide similar health services. There was just one major difference between the government and the NGO healthcare workers: the NGO workers were paid much more than the government workers.
Results
We exploit the randomised entry of the NGO across 127 very poor villages in rural Uganda, and leverage detailed micro data on the presence and utilisation of government services and NGO services before and after NGO entry. The main analysis examines the effect of NGO entry on the labour supply of health workers and household healthcare coverage. We find that the presence of the NGO produces very different results depending on (i) whether the village has a pre-existing government worker and (ii) the availability of skilled labour in the village.
In villages where there is a pre-existing government worker and where skilled labour is scarce, we show that the NGO often “poaches” the government worker – NGO’s poach approximately one in two government workers when they enter these villages. This causes health coverage from any worker (government or NGO) to decline, signalling a reduction in government-provided health services.
Meanwhile, in villages with a pre-existing government worker and where skilled labour is abundant at baseline, the NGO hires a second health worker. This causes health coverage from both the government and the NGO to increase, thus highlighting the presence of complementarities between the NGO and the government. In villages without a pre-existing government worker, the NGO hires the first health worker in the village. This causes health coverage from the NGO to increase. Thus, the effects of NGO entry on government capacity are nuanced and depend on the supply of skilled labour.
The poaching we observe translates into worse health outcomes. In villages with a government worker, NGO entry is associated with an increase in mortality and a worsening in child health behaviour. Our evidence suggests that poaching worsens health outcomes because of NGO’s incentive structure, which pays health workers per item sold of health commodities rather than for delivering healthcare services. Despite NGO workers investing more hours into the job, the cumulative amount of time they allocate to providing free health services only amounts to 27 to 48% of that expended by government workers.
Policy implications
Our findings emphasise the importance of coordination between NGOs and governments so that NGOs do not adversely affect the development of government capacity. This can be done by carefully setting wage levels according to the local labour market. It can also be facilitated with better record-keeping of where the government and NGOs operate. Currently, no sub-Saharan African country has a comprehensive updated database of NGO operations and better data would allow NGOs and governments to coordinate resource allocation. Our findings also emphasise the importance of better understanding the nature of the complementarities between NGOs and government. This can help provide a more detailed guide to policymakers who wish to increase NGO efficacy.
References
Deserranno, E, A Nansamba, and N Qian (2023), “The Impact of NGO-Provided Aid on Government Capacity: Evidence from Uganda” Working Paper.
Easterly, William. 2003. “Can Foreign Aid Buy Growth?” Journal of Economic Perspectives 17 (3):23–48.
Farmer, Paul. 2008. “Challenging Orthodoxies: The Road Ahead for Health and Human Rights.” Health and Human Rights :5–19.
Koch, Dirk-Jan, and Lau Schulpen. 2018. “An Exploration of Individual-Level Wage Effects of Foreign Aid in Developing Countries.” Evaluation and Program Planning 68:233 – 242.
Pfeiffer, James, Wendy Johnson, Meredith Fort, Aaron Shakow, Amy Hagopian, Steve Gloyd, and Kenneth Gimbel-Sherr. 2008. “Strengthening Health Systems in Poor Countries: A Code of Conduct for Nongovernmental Organization.” American Journal of Public Health 98 (12):2134–40.