Public Expenditure Analysis for Education

1. Public Expenditure Analysis for Education Deon Filmer DECRG January 2004

2. 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?

3. 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

4. Education spending as a percent of GDP Source: World Development Indicators Database. Data are for 2000

5. 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.

6. 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

7. Spending on what … • Type of spending • Capital vs. Recurrent • Functional allocations • budget shares by level of education • Economic allocations • inputs—e.g., teachers, textbooks

8. Spending on teachers in Sub-Saharan Africa – as a share of recurrent spending (primary level) Source: WDR 2004

9. 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

10. Primary completion rate and public spending on education across countries (conditional on GDP per capita) Source: WDR 2004

11. Changes in the primary completion rate and public spending on education within countries Source: WDR 2004

12. Education expenditures and learningSpending and median math test scores Source: TIMSS

13. Why public intervention ? • Public responsibility for education motivated by • Equity (Human Rights?) • Market failures • Social cohesion/Nation-building

14. Equity How unequally is education distributed – and where are the problems? Percent aged 15 to 19 completing each grade or higher Source: WDR 2004

15. Equity Is the current allocation of expenditures pro-poor – benefit incidence analysis Source: WDR 2004

16. 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

17. 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

18. Externalities – social outcomesPercent of children with all immunizations by mother’s education Secondary Primary None Source: Analysis of Demographic and Health Survey data

19. 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

20. Public provision and public finance … no single model More public finance More public provision

21. 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?

22. Netherlands Bolivia France UK 50% 0% 100% Peru Uganda Sierra Leone S. Africa Malaysia Indonesia Germany Venezuela Ghana USA 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.

23. 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

24. 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

25. Accountability in the delivery of education services … the WDR 2004 framework Policymakers Provider organizations Students/ Parents Schools/ teachers

26. 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

27. Building accountability into the systemVoice • 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) Policymakers Students/ Parents

28. Building accountability into the systemCompact • 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 Policymakers Provider organizations Schools/ Teachers

29. Building accountability into the systemCompact – Staff absence Percent of staff absent in primary schools

30. Building accountability into the systemCompact – Show me the money The money trail in Papua New Guinea

31. 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

32. Building accountability into the systemClient 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

33. 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

34. 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