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Public Expenditure Analysis for Education Deon Filmer DECRG January 2004 Key questions What are the basics of public expenditures? – How much, what are the trends, what is public money spent on, etc… How can public money be put to its best use? – – – What should government finance? What is the distributional impact of public spending? How can the system be improved in order to maximize the impact of public spending? The basics of public expenditures How much does government spend – – As a share of GDP As a share of total public expenditures And how has that changed over time Education spending as a percent of GDP Haiti 1.1 Cambodia 1.9 China 2.9 Senegal 3.2 United States 4.8 South Africa 5.5 Denmark 8.2 Cuba 8.5 South Asia 2.5 Sub-Saharan Africa 3.4 World 4.4 Source: World Development Indicators Database. Data are for 2000 Public education spending as a percent of government expenditures 30 75th percentile 20 Mean 25th percentile High-income countries Middle-income countries Low-income countries Sub-Saharan Africa South Asia Middle East and North Africa Latin America and Caribbean Europe and Central Asia 0 East Asia and Pacific 10 Note: Of the 135 countries included, 52 have data for 2000, 8 for 2001, 30 for 1999, 17 for 1998. The remaining 28 have data from earlier in the 1990s. Source: World Development Indicators database. Some things to keep in mind Planned vs. actual expenditures Real vs. nominal expenditures Consolidated budget: – – all sources of public money all expenditures for the sector Spending on what … Type of spending – Functional allocations – Capital vs. Recurrent budget shares by level of education Economic allocations – inputs—e.g., teachers, textbooks Spending on teachers in Sub-Saharan Africa – as a share of recurrent spending (primary level) Source: WDR 2004 But don’t get lost in the budget numbers Frequently, more public money and better outcomes are not strongly related (or related at all) – Public Expenditure Analysis is an opportunity to reflect on how to make money work to improve outcomes Primary completion rate and public spending on education across countries (conditional on GDP per capita) Source: WDR 2004 Changes in the primary completion rate and public spending on education within countries Source: WDR 2004 Education expenditures and learning Spending and median math test scores 700 Singapore 600 Median math score Korea Japan Hong Kong Switzerland Netherlands Slovak Republic Bulgaria Australia Thailand Sweden Germany 500 Czech Republic Norway United States Spain Romania Greece Denmark Lithuania Portugal Iran 400 Colombia South Africa 300 0 2 4 6 Public spending on pre-primary, primary, and secondary education (% of GNP) 8 Source: TIMSS Why public intervention ? Public responsibility for education motivated by – – – Equity (Human Rights?) Market failures Social cohesion/Nation-building Equity How unequally is education distributed – and where are the problems? Percent aged 15 to 19 completing each grade or higher Source: WDR 2004 Equity Is the current allocation of expenditures pro-poor – benefit incidence analysis Source: WDR 2004 Equity Education as an anti-poverty program If spending on education is justified as an antipoverty program, then it needs to be assessed as such Market failures Externalities Productivity – e.g. spread of adoption of green revolution technology in India (Foster and Rosenzweig, JPE 1995) Social outcomes – Not just for the person making the education investments but others as well Externalities – social outcomes Percent of children with all immunizations by mother’s education Secondary 100 Primary None 80 60 40 20 0 Nigeria 1999 Ethiopia 2000 Paraguay 1990 Haiti 2000 India 1998/99 Philippines 1998 Indonesia 1997 Peru 2000 Brazil 1996 Source: Analysis of Demographic and Health Survey data Market failures Capital market imperfections – – – Education is a long-term investment process: financial institutions unwilling to take risk Difficult for providers to borrow against future revenue stream Difficult for students to borrow against future income stream Asymmetric information – – School quality is hard to assess Student quality is hard to assess Public provision and public finance … no single model More public finance Voucher schools; Public schools with regulated private schools little/no cost recovery (Chile basic, (many) Netherlands, Belgium) Unsubsidized private Public facilities sector (Philippine, tertiary with cost recovery level) (US, Korea, Chile universities) More public provision Public responsibility for education A key question Is public spending allocated in such a way as to address the equity and efficiency issues that motivate public involvement? The share of private spending also varies substantially Private expenditure as % of total education expenditure Netherlands Bolivia France UK 0% S. Africa Malaysia Venezuela Ghana USA 50% Indonesia Germany 100% Peru Uganda Sierra Leone Source: Psacharopoulos and Nguyen 1995 “Fighting Poverty: the role of government and the private sector” World Bank. And government intervention need not be public provision or even finance Regulation – – – Can regulate without financing or providing Should regulate whether provision is public or private If provision is public, regulator and provider should not be the same Information – – To inform student and provider choice To create incentives for policymakers and providers to deliver Public provision is widespread in education, especially at basic levels Buying a sandwich vs. getting educated – Supply and consumption of educational services are not a simple market transaction with direct feedback from the customer Just as there are market failures, there are government failures Accountability in the delivery of education services … the WDR 2004 framework Policymakers Provider organizations Students/ Parents Schools/ teachers Building accountability into the system Voice Ah, there he is again! How time flies! It’s time for the general election already! By R. K. Laxman Building accountability into the system Voice Policymakers Students/ Parents Enhancing citizen voice to avoid: – – – Resources to political constituents and voting blocks such as teachers’ unions (political patronage) Resources to personal gain (corruption) Resources for less relevant learning outcomes (delinked from private sector and labor markets) Building accountability into the system Compact Policymakers Improving the compact(s) to ensure that providers have the incentive to serve poor people (well): – – Need to balance the autonomy of schools and teachers with performance assessment Schools and school systems must be able to manage for performance, particularly, to train and motivate teachers Provider organizations Schools/ Teachers Building accountability into the system Compact – Staff absence Percent of staff absent in primary schools 30 20 10 0 Ecuador India Indonesia Papua New Guinea Peru Zambia Uganda Building accountability into the system Compact – Show me the money The money trail in Papua New Guinea Flow of recurrent expenditures for community and primary schools Bank Account Education payroll Non-teaching staff Teacher Bank Account Leave fares Treasury "Grants to provinces" (Transfer) Contractor Contractor Province Education subsidy (Q2,Q4) Education subsidy (Q1 and Q3) Education subsidy (Q1,Q3) School NDOE Funds for maintainence and infrastructure District ? LLG ? Parents Infrastructure and Maintenance grant (Developed with districts for grades 7 & 8): only 46 schools in 2001 Bank Account Building accountability into the system Client Power I can’t understand these people. Not a soul here knows how to read or write and yet they want a school By R. K. Laxman Building accountability into the system Client power Improving client power directly to improve services: – – Choice (e.g. Girls’ scholarship program Bangladesh, with school subsidies for girl’s enrollment) Participation (e.g. EDUCO in El Salvador with parent committees responsible for education delivery) Students/ Parents Schools/ Teachers Building accountability into the system Client power – Parent participation in EDUCO EDUCO promoted parental involvement… …which boosted student performance Source: Adapted from Jimenez and Sawada 1999 Key data elements of PEA Basic budget information Data on outcomes – assessment system – household surveys Links between spending and outcomes – Household surveys – School surveys – Administrative data Impact evaluation evidence on programs