The space for private provisions providers
Our economy has changed a lot in the last three odd decades. Privatisation, liberalisation, decentralisation, among other changes, have had significant impacts on the structure of specific sectors. Goods and services that were once provided by the state, and it was thought that they could only be provided by the state, or should only be provided by the state, are now also being provided by the private sector. But this must have an impact on the public sector provision and the ability of citizens to demand quality from the public as well as the private sector. A colleague and I wanted to understand this dynamic, so, with support from Institute of Social and Policy Sciences (ISAPS), we conducted a 150 household survey in an urban area to understand some of the changes and their effects on exit, voice, and public action in general.
We ensured we selected the households randomly from across high, middle and low-income households. This gave us a good sample with significant variation in household size, income, education of household head, and profession. Interestingly, we found that almost 90 percent of the households had a television and some 60 percent had a computer. We wanted to check on these to ensure these were households that had good opportunities to connect with the world outside and had access to information. The mobile phone penetration is also very high in these households. Even with the access to information, information about their local representatives, MPAs/MNAs and administrators was not very well known. And there are few welfare organisations, vehicles for public action, working in the neighbourhoods we surveyed.
What came as a surprise was the extent to which households, even in the low income brackets, were using private providers even in areas that are still thought to be the domain of the state: water supply and security. Low-income households, on average, paid about Rs 200 per month for their water supply. Though they depend very heavily on public provision of water, they have to supplement it with access to water tankers. For the rich, the average monthly expenses go up to Rs 1,200. This does not include the one-time expenses that many households, especially in the middle to higher income households, have incurred in getting private boring done for their personal access to ground water.
For security, even the low-income households were paying more than a hundred rupees a month for sharing in private security arrangements of various kinds. The rich had guards of their own, and some even mentioned they had ammunition at home and will not hesitate to use it to protect themselves and their property. Exit from the public sector seems to be the oldest, most established, and the deepest in the area of education. Though a small number of children still go to public schools, a much larger number goes to private schools, and this seems to be true of the low-income households as well. In fact, though our data does show that the exit from public sector happens with income, the more important determinant seems to be the ability of parents to take their children to schools. Low-income households report that their children go to neighbourhood schools much more often than the higher income groups do: cost and availability of transportation clearly is a constraint. Our sample is small, but it still shows that more girls are enrolled in private primary schools than boys. This could just be due to relative supply of the two types of schools in neighbourhoods but does seem to point out the importance accorded to education, across gender.
Respondents from low-income households have a higher dependence on state-provided services, across all three services that we studied. Even where the quality of services being provided by the state is not of acceptable quality, as in the case of water, the dependence on the state still remains. The low-income households have a limited ability to switch to private providers, though they do supplement public provision where they can. As income levels go up the ability, to exit from state providers and switch to a private provider goes up. And people do switch. For the higher income group, state provider is just one of the options and if they feel it is not of good enough quality, they switch.
Interestingly, while the low income depend on the state and state provision of basic services, they also feel there is not much point to complaining (voice) when the service provided by the state is poor. The usual responses are: they do not know who to complain to, the cost of organising public action, in time and money, is too high, and when they have complained to local representatives, MPAs/MNAs, and government officials, they have not heard, and repeated complaints have been ignored. They do believe that sustained public action might work, but it was just too hard and expensive to organise and sustain public action. The higher income households feel that public action could be effective, but also feel they have not had any need to engage in public action. They just switch providers as that is easier for them. Even within private providers, if people feel one provider is not giving good enough quality, they switch to another provider (exit) and seldom resort to complaining about quality to individual providers (voice).
The case of the middle-income households surprised us a little. They use exit more than the low-income households, though their dependence on state provision is still there. But what is interesting is that they do file more complaints, on average, than the low-income households or the rich-income households, believe in the efficacy of voice and public action more, and think that public action can be more effective. But here too, on the margin, their resolve to sustain public action is weakened by the ability to exit.
Our economy has certainly changed a lot over the last three decades. Where it has helped people have more choice, it is also increased the opportunity to exit public provision, and while our data is based on a small sample and we are still exploring various implications, it does seem that the ability to exit has weakened the resolve to use voice and this also seems to have weakened the ability to organise and sustain public action. The low-income group seems to be the most severely affected by the change as they have limited ability to exit while the voice option, overall, has been weakened by the exit of the more connected middle and higher income groups. It will be interesting to see if this has anything to do with the need for ‘change’ that is being articulated in the political sphere right now.
The writer is an Associate Professor of Economics at LUMS (currently on leave) and a Senior Advisor at Open Society Foundation (OSF). He can be reached at fbari@sorosny.org