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working well, only 4 percent of all students are enrolled in private or religious schools (Sri Lanka, Ministry of Education, 2007). Private schools perform better than public schools on many dimensions. Teacher absence is considerably less, and student learning outcomes are significantly better (Muralidharan and Kremer 2008; Andrabi et al. 2007). Can the entry of such nonstate actors into the education sector be the answer to the substantial failings in the public education system that were documented earlier, as well as to the difficulties in improving local collective action? There are three reasons why the state still needs to be a major force in the provision of health and education services on a large scale. First, private schools do not provide universal service: they are more likely to be located in larger villages, as in India, or in richer villages and richer settlements within villages, as in Pakistan. In both India and Pakistan, they are much more likely to exist when teacher absenteeism in the public school system is high. Second, private schools are more expensive for the students than are public schools. In Pakistan, the average annual cost of a private primary school is 3,563 rupees, more than seven times the public school cost of 479 rupees. The cost of schooling is a significant deterrent to enrollment: 25 percent of boys and 22 percent of girls cite the cost of schooling as their reason for not going to school, and 18 percent of boys and 15 percent of girls cite it as their reason for dropping out of primary school (Pakistan 2007, tables 2.20, 2.23, and 2.24). Both the location and the cost of private schools limit the access of the poorest households to such facilities. We should note, however, that the total social costs of private schools are in fact lower than those of public schools (Andrabi et al. 2007). This suggests that increasing the ability of households to access these schools—for instance through education vouchers—can be an effective policy tool for improving learning outcomes. In general, such combinations of public and private action in providing education and health services deserve more detailed attention, both in the academic literature and in policy making. Third, an intriguing study from Pakistan suggests that an initial investment by the state may be needed for private schools to be viable. The main advantage of private schools is that they are able to hire local teachers for much lower wages than those paid to government schoolteachers, who typically enjoy civil service protection. Where do private schools find teachers with at least minimal levels of education? Andrabi, Das, and Khwaja (2007) find that these teachers are the products of prior investments by the state in expanding access to public education in rural areas. This is consistent with the timing of the recent rise in private schools. Over time, it may be possible for the private school system to generate its own teachers and thus become self-sustaining.
Conclusions This paper has documented the shortfalls in the delivery of health and education services across South Asia. A key feature of the data is that there are large gaps in service delivery even within specific countries. I surveyed two classes of explanations for such underprovision. The first broad class focuses on the factors that might make