Public%20Expenditure%20Analysis%20for%20Education

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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
75th percentile
Mean
25th 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
• inputse.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 dont 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
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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?
Percent aged 15 to 19 completing each grade or
higher
Source WDR 2004
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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 mothers
education
Secondary
Primary
None
Source Analysis of Demographic and Health Survey
data
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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 private sector (Philippine, tertiary level) Public facilities with cost recovery (US, Korea, Chile universities)
More public finance
More public provision
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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.
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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
Policymakers
Provider organizations
Students/ Parents
Schools/ teachers
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Building accountability into the systemVoice
Ah, there he is again! How time flies! Its
time for the general election already!
By R. K. Laxman
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Building accountability into the systemVoice
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)

Students/ Parents
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Building accountability into the systemCompact
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
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Building accountability into the systemCompact
Staff absence
Percent of staff absent in primary schools
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Building accountability into the systemCompact
Show me the money
The money trail in Papua New Guinea
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Building accountability into the systemClient
Power
I cant 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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Building accountability into the systemClient
power

• Improving client power directly to improve
  services
• Choice (e.g. Girls scholarship program
  Bangladesh, with school subsidies for girls
  enrollment)
• Participation (e.g. EDUCO in El Salvador with
  parent committees responsible for education
  delivery)

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