Charging User Fees for Social Services: The Case of Education in Malawi

Abstract

The paper analyzes in detail one of the ways to reduce the problem of recurrent expenditure in social sector services - that of raising user charges. When low user charges and limits on the government budget cause an excess demand for a service, one of two things must happen: some people will be denied the service, or the quality of the service will deteriorate. This paper argues that both these phenomena typically hurt the poor more than the rich. Therefore, raising user charges in line with the efficiency rule suggested will result in relatively more of the poor benefiting as compared to the rich. The second part of the paper applies the framework developed here to the education sector in Malawi. Based on the analysis of readily available data, specific policy conclusions are drawn regarding user charges. The recommendations are practicable and efficient, while simultaneously allowing a greater proportion of the poor to have access to education.

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