Assessing Public Expenditures on Social Protection: Some Methodological Suggestions

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Assessing Public Expenditures on Social
ProtectionSome Methodological Suggestions

• Kathy Lindert, World Bank
• Qualidade do Gasto Publico no Brasil
• June 26-27, 2003

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Outline Key Questions

• Sector-Wide View
• What are the goals of the sector?
• Where does the money come from (financing)?
• How much is spent?
• Where does the money go? (composition of
  spending)
• Basic inventory
• Mapping against key vulnerable groups
• Gaps, duplications, horizontal inequities across
  programs
• Program View (what do you get for the money?)
• Institutional aspects
• Performance indicators

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Sector-Wide View
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Goals of the Social Protection Sector
To assist individuals, households, and
communities to better manage risks, and to
provide support to the critically poor

• SOCIAL ASSISTANCE
• To provide support to the extreme poor
  (structural poor)
• To help households cope with shocks (transient
  poor)
• To reduce inequality (redistributive goals)
• To reduce future poverty via human capital
  conditions (CCT)
• To provide social services to particularly
  vulnerable groups
• (Generally in form of non-contributory transfers
  cash or in-kind conditional or not)

SOCIAL INSURANCE - To help individuals,
households mitigate the adverse effects of risks
and shocks, such as old age, disability, health
shocks, unemployment, etc. (Generally in form of
contributory payments)
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Goals, continued

• Goals depend largely on profile of poverty, risk
  and vulnerability
• Profile of Poverty
• Poverty headcount, gap, trends
• Characteristics of the poor
• Degree of chronic vs. transient poverty (what
  share are structurally poor vs. poor due to
  shocks?)
• Profile of risks and vulnerability
• Sources of risk and vulnerability
• Specific vulnerable groups (e.g., disabled,
  street children, child laborers, indigenous,
  etc.)
• Goals also depend on the extent to which private
  transfers, insurance are available and accessible
  to the poor (formal, informal)

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Where do funds come from? (sources of financing)

• General Revenues
• Other sources (mainly for social insurance)
• Payroll taxes/contributions
• Employer/employee contributions
• Self-employed contributions
• Penalties from employers
• Interest income
• Other fees for service
• Other sources (not always counted)
• Donors, NGOs
• Counterpart contributions

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Financing Issues

• Earmarked or not (e.g., fondo de pobreza)
• Federal, state, local
• Open entitlement vs. fixed budget allocation
• Reliability, pro-cyclical or counter-cyclical

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How much is Spent? (1)

• Not an easy question to answer
• Spending spread across multiple programs,
  multiple agencies, and multiple levels of
  government
• Need an inventory of programs spending
• At federal level (across agencies)
• At state/municipal level
• Probably cant do complete inventory for all
  states/municipalities
• Select sample (some with high capacity/spending,
  some with low capacity/spending) to gauge
  overlaps, complementarities with federal spending

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...How much is spent? (2)

• With inventory of spending on each of the (main)
  programs, can estimate how much is spent on SP
• Calculate as of GDP, total public spending,
  total social spending

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Composition of Spending (1) Basic inventory of
programs

• Social insurance
• Pensions (general old age, survivor, disability,
  civil service)
• Unemployment insurance
• Health insurance
• Social assistance
• Cash transfers
• Conditional (linked to health, education sectoral
  goals)
• Non-conditional (pure cash transfers)
• In-kind transfers (food such as school feeding,
  other)
• Subsidies (food, energy, agricultural, housing)
• Workfare (transfers in exchange for public works)
• Active labor market programs

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Composition of Spending (1) Basic inventory of
programs Mexico Example
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Composition of Spending (2)Mapped Against Key
Vulnerable Groups

• One quick and practical way to analyze the mix of
  programs is to map spending on the main programs
  against key vulnerable groups using a
  life-cycle approach
• Advantages of this life-cyclemapping
• Easy, quick overview of where funding goes (main
  groups)
• Can identify possible overlaps, spending biases
  (e.g., in favor of elderly rather than youths),
  and possible gaps for broad groups
• Some disadvantages
• Not sure of actual gaps, duplications at
  household level
• Life-cycle approach mainly focuses on individual
  risks, ignores that these individuals are
  actually part of households

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Composition of Spending (2, contd)Identifying
Vulnerable Groups Mexico Example
(Highlighted areas signal prominent at-risk
groups)
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Mexico Vulnerable Groups
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The life-cycle faces its limits and so we move
beyond it Social risk among specific
population groups in Mexico
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Taking the next step mapping programs onto risk
groups Incidence of programs targeted to key
social risks by decile and region
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Composition of Spending (3, contd)Gaps,
duplications, horizontal inequities across
programs

• Another important aspect in analyzing the mix of
  social programs is the extent to which they incur
  duplications or gaps in coverage, which result in
  horizontal inequities
• Examine which households receive
• No benefits (if poor, a gap)
• Benefits from one program
• Benefits from multiple programs

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Composition of Spending (3, contd)Gaps,
duplications, horizontal inequities across
programs

• Data needed
• Representative household survey data with
  comprehensive listing of main (nation-wide)
  programs
• Such data are not regularly collected in Brazil
• PNAD do not include comprehensive list of main
  social programs
• POF survey will yield some such data for first
  time since 1996... an important opportunity for
  policy feedback

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Composition of Spending (3, contd) Gaps,
duplications, horizontal inequities across
programs, example
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How Adequate?... A Judgment Call

• Judgments
• Does the program mix have the appropriate blend
  of social assistance and social insurance?
• Appropriate mix of public private
  provision/financing?
• Given the countrys profile of poverty and
  vulnerability, does the program mix provide an
  adequate balance of efforts to assist
• The chronic poor (structural poor)
• The transient poor (due to shocks)
• Special vulnerable groups (young children,
  youths, disabled, etc.)
• Of formal/informal sectors?
• Are there big gaps in intervention?
• Significant overlaps, duplication, fragmentation?
• Is the overall level of effort sensible? Too
  high? too low?

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Program Analysis What do you get for the money?
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Indicators to Evaluate(for each of main programs)

• Institutional Aspects
• Objectives
• Institutional Arrangements Delivery Mechanisms
• Sustainability
• Performance Indicators (What do you get for the
  spending?)
• Adequacy (Coverage, benefit levels)
• Equity
• Efficiency
• Impact (poverty, inequality, human capital, etc.)

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Institutional Aspects

• Objectives of Program
• Ideally should evaluate program against these
• Often, programs have multiple objectives
• Institutional Arrangements Delivery Mechanisms
• Agencies responsible for design, implementation
• Administrative structures
• Resources and systems (adequacy)
• Incentive structures
• Targeting mechanisms
• Delivery of benefits
• Sustainability
• Is the burden on the budget sustainable? How
  would predicted demographic, poverty or fiscal
  changes affect this?

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Adequacy of Programs

• Coverage
• Who benefits from the spending?
• disaggregated as relevant urban/rural, poverty
  groups, region, formal/informal
• Adequacy of benefit level
• What is the average transfer?
• Benchmarks vary by program, e.g.,
• Average pensions compared to average wages
• Unemployment insurance to average wages
• Social assistance to poverty line, etc.
• Data sources
• Institutional data
• Household survey data (coverage)

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Adequacy Coverage (of poor)
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Adequacy Benefit Levels
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Equity

• Examine
• Who receives how much? (distributional incidence
  of benefits received across deciles/quintiles)
• Errors of exclusion, inclusion
• By welfare group (decile, quintile)
• Also by other pertinent groups (urban/rural,
  informal/formal, gender, race etc.)
• Data Needed
• Nationally representative household survey data
  that includes questions on receipt of program
  benefits (and how much received)
• Such data are currently weak in Brazil (PNAD
  dont include social programs)... POF opportunity

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Equity Distributional Incidence
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Overall Effectiveness Coverage, benefits, equity
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Efficiency

• Specific indicators vary by program. Some
  examples
• Social assistance administrative costs
• Unit costs how compare with international
  practice or local benchmarks?
• Pensions Effective rate of return
• All programs does intended budget reach
  beneficiaries or are there indications of
  resources being siphoned off for unintended uses?
• Impact on labor markets (discourage work?)

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Impact

• Impact on relevant outcomes
• Changes in poverty, inequality
• Changes in employment
• Human capital outcomes (e.g., do more kids attend
  school due to conditional transfer?)
• etc.
• Numerous methodologies for assessing these
• Simulations using household survey data
• Simple simulations (given transfer amount
  received)
• Simulations taking into account behavioral
  effects
• Ex post impact evaluations (with/without
  before/after control/treatment groups)

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Conclusions

• Important to look both at individual programs
• Efficiency, effectiveness, impact
• But also at spending across programs in sector
• Gaps, duplications, fragmentation
• Appropriate mix or major biases
• Multiple providers
• Levels of government (federal, state, local)
• Various agencies / ministries
• Uses of such analyses
• Management and planning feedback
• Possibly suggestive of needed overhaul,
  integration, rebalancing of safety net