Fiscal decentralisation and infant mortality rate: The Colombian case

There is a paucity of research analysing the influence of fiscal decentralisation on health outcomes. Colombia is an interesting case study, as health expenditure there has been decentralising since 1993, leading to an improvement in health care insurance. However, it is unclear whether fiscal decentralisation has improved population health. We assess the effect of fiscal decentralisation of health expenditure on infant mortality rates in Colombia. Infant mortality rates for 1080 municipalities over a 10-year period (1998–2007) were related to fiscal decentralisation by using an unbalanced fixed-effect regression model with robust errors. Fiscal decentralisation was measured as the locally controlled health expenditure as a proportion of total health expenditure. We also evaluated the effect of transfers from central government and municipal institutional capacity. In addition, we compared the effect of fiscal decentralisation at different levels of municipal poverty. Fiscal decentralisation decreased infant mortality rates (the elasticity was equal to −0.06). However, this effect was stronger in non-poor municipalities (−0.12) than poor ones (−0.081). We conclude that decentralising the fiscal allocation of responsibilities to municipalities decreased infant mortality rates. However, this improved health outcome effect depended greatly on the socio-economic conditions of the localities. The policy instrument used by the Health Minister to evaluate municipal institutional capacity in the health sector needs to be revised.

► This study provides an accurate measure of the effect of fiscal decentralisation on health outcomes in Colombia. ► Fiscal decentralisation decreased infant mortality rates. ► This positive result of fiscal decentralisation was greater in non-poor municipalities than in poor ones.