This book studies the effects of incorporating market incentives into the public goods arena. Carol Graham examines the effects of market-based strategies on the performance of public institutions, the political sustainability of market reforms, and equity. In so doing, she examines a variety of reform experiences in the realms of education, health, social security, and state- owned enterprises and across a range of country and income contexts, with case studies drawn from Latin America, Africa, and Eastern Europe. The studies show that the incorporation of new market incentives, such as vouchers in education and private social security systems, can have positive effects on the performance of public institutions. The effects on equity are less clear, however, and in many cases efficiency gains entail short-term equity losses. The poorest sectors are usually least equipped to take advantage of new incentives and may be marginalized from the reforms and lose access to essential services. Yet in the long-term, negative equity effects are usually counter-balanced by the benefits of enhancing the performance of public institutions. As this book makes clear, the issues explored have relevance for advanced industrial societies as well as for developing economies.

Carol Graham is the Leo Pasvolsky Senior Fellow in Global Economy and Development at the Brookings Institution. She is also College Park Professor at the University of Maryland's School of Public Policy. Her previous books include Happiness around the World: The Paradox of Happy Peasants and Miserable Millionaires (Oxford) and Happiness and Hardship: Opportunity and Insecurity in New Market Economies, with Stefano Pettinato (Brookings).