When both states and markets fail: asymmetric information and the role of NGOs in African health care

In African health care the "miracle of the market" has not occurred. Patients exhibit willingness to pay for quality health care and yet good private practitioners are unable to sell their services. Simultaneously nongovernmental organizations (NGOs) are running successful health facilities for which patients are willing to pay. We use 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 validate this view empirically and show that NGOs have the institutional capacity to deliver high quality health care. We show that at the same time, neither private practitioners nor regular government organizations charging fees will easily succeed. (C) 2002 Elsevier Science Inc. All rights reserved.