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Public Expenditure Analysis for Education
Deon Filmer
DECRG
January 2004
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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?
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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
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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
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Public education spending as a percent of government expenditures
0
10
20
30
Eas
t A
sia
and
Pac
ific
Eur
ope
and
Cen
tral
Asi
a
Latin
Am
eric
aan
d C
arib
bean
Mid
dle
Eas
t an
dN
orth
Afr
ica
Sou
th A
sia
Sub
-Sah
aran
Afr
ica
Low
-inc
ome
coun
trie
s
Mid
dle-
inco
me
coun
trie
s
Hig
h-in
com
eco
untr
ies
Mean
25th percentile
75th percentile
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.
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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
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Spending on what …
Type of spending– Capital vs. Recurrent
Functional allocations – budget shares by level of education
Economic allocations – inputs—e.g., teachers, textbooks
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Spending on teachers in Sub-Saharan Africa – as a share of recurrent spending (primary level)
Source: WDR 2004
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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
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Primary completion rate and public spending on education across countries (conditional on GDP per capita)
Source: WDR 2004
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Changes in the primary completion rate and public spending on education within countries
Source: WDR 2004
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Education expenditures and learningSpending and median math test scores
Source: TIMSS
AustraliaBulgaria
Colombia
Czech Republic
Denmark
Germany
Greece
Hong Kong
Iran
Japan
Korea
Lithuania
Netherlands
Norway
Portugal
Romania
Singapore
Slovak Republic
South Africa
Spain
Sweden
Switzerland
Thailand
United States
300
400
500
600
700
0 2 4 6 8
Public spending on pre-primary, primary, and secondary education (% of GNP)
Me
dia
n m
ath
sc
ore
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Why public intervention ?
Public responsibility for education motivated by– Equity (Human Rights?)– Market failures– Social cohesion/Nation-building
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Equity How unequally is education distributed – and where are the problems?
Source: WDR 2004
Percent aged 15 to 19 completing each grade or higher
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Equity Is the current allocation of expenditures pro-poor – benefit incidence analysis
Source: WDR 2004
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Equity Education as an anti-poverty program
If spending on education is justified as an anti-poverty program, then it needs to be assessed as such
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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
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Externalities – social outcomesPercent of children with all immunizations by mother’s education
0
20
40
60
80
100
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
None
Primary
Secondary
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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
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Public provision and public finance … no single model
Voucher schools; regulated private schools (Chile basic, Netherlands, Belgium)
Public schools with little/no cost recovery (many)
Unsubsidized privatesector (Philippine, tertiary level)
Public facilitieswith cost recovery(US, Korea, Chile universities)
More public provision
More public finance
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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?
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The share of private spending also varies substantiallyPrivate expenditure as % of total education expenditure
Source: Psacharopoulos and Nguyen 1995 “Fighting Poverty: the role of government and the private sector” World Bank.
0% 50%100%
S. AfricaMalaysia
BoliviaFranceUK
VenezuelaGhanaUSA
IndonesiaGermany
PeruUgandaSierra Leone
Netherlands
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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
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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
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Accountability in the delivery of education services … the WDR 2004 framework
Students/Parents
Policymakers
Schools/teachers
Provider organizations
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Building accountability into the systemVoice
Ah, there he is again! How time flies! It’s time for the general election already!
By R. K. Laxman
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Building accountability into the systemVoice
Students/Parents
Policymakers
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)
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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
Building accountability into the systemCompact
Policymakers
Schools/Teachers
Provider organizations
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Building accountability into the systemCompact – Staff absence
Percent of staff absent in primary schools
0
10
20
30
Ecuador India Indonesia PapuaNew
Guinea
Peru Zambia Uganda
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Building accountability into the systemCompact – Show me the money
Flow of recurrent expenditures for community and primary schools
Leave fares
"Grants to provinces" (Transfer)
Education subsidy (Q2,Q4)
Education subsidy (Q1 and Q3) Education subsidy (Q1,Q3)
Funds for maintainence and infrastructure
Infrastructure and Maintenance grant (Developed with districts for grades 7 & 8): only 46 schools in 2001
Bank Account
School
Contractor
Contractor
Bank Account
Non-teaching staff
Parents
Bank Account
Treasury
NDOE
District ?
LLG ?
Education payroll
Province
Teacher
The money trail in Papua New Guinea
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Building accountability into the systemClient 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
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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)
Building accountability into the systemClient power
Schools/Teachers
Students/Parents
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Building accountability into the systemClient power – Parent participation in EDUCO
EDUCO promoted parental involvement…
…which boosted student performance
Source: Adapted from Jimenez and Sawada 1999
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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