Regulation of Social Services in the Least Developed Countries: What Are the Issues at Stake?

The privatization trend affecting the state involvement in productive sectors is also challenging the role of the state in the provision of social services. And, as private participation in social sectors increases, a regulatory framework is needed to ensure that the market reaches socially efficient outcomes. The regulation of social services carries the problem of conceptualization. What is the aim of regulatory intervention in social sectors? And what is the market structure to which this regulatory constraint will be applied to? These are the questions we discuss in this paper, is devoted to analysing the role of regulation of social services in low-income countries within the so-called mixed economy of care, characterized by multiple providers: the state, the private sector, non-profit organizations.In the first section, we describe the market failures characterizing social services that would justify government intervention as the second best option. In the second section, we present some examples on the evolution of the mixed economy of care in low-income countries, while in the third section, we analyse the behaviour of each social service provider: the state, NGOs and private for-profit organizations. In the fourth section, we present the theory of regulation applied to social services. In this section, we conceptualize the problem in two ways: first, we consider the case of procurement in the presence of asymmetric information, and second, we refer to a problem of mixed oligopoly in which the presence of the state as a provider is in itself a regulatory instrument. Conclusions close the paper.