EDUCATION AND THE PUBLIC BUDGET
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EDUCATION AND THE PUBLIC BUDGET
Emmanuel Jimenez
Budgetary Processes & Public Expenditure Course
May 2000
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Education and Policy: Principles
• Correcting for Market Failures
• Addressing Inequities
• Overcoming Implementation Problems
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Correcting for Market Failures
• Private returns to education are high
• So, why should the government spend?
• Do these reasons hold for all types of education?
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Private ROR to EducEarnings
Time/Age inyrs
Benefits
Opp Costs
Upper Level
LowerLevel
Direct Costs
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Private Rates of Return
Primary Second Higher
Bol 89 9.8 8.1 16.4
Bra 89 36.6 5.1 28.2
Mex 84 21.6 15.1 21.7
Para 90 23.7 14.6 13.7
CotI 84 25.7 30.7 25.1
Leso80 15.5 26.7 36.5
Mlwi82 15.7 16.8 46.6
Japa 76 13.4 10.4 8.8
Tai 72 50.0 12.7 15.8
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Market Failures in Education
• Externalities:– Productivity– Nation-Building
• Imperfect capital markets
• Imperfect information
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Market Failures in Education
• Primary education: Strong externalities – productivity (effect of Green Revolution)
– nation building (literacy/numeracy)
• Higher education:– capital market failures
– no externalities except for research
• Technical education: none• Secondary: ???
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Inequity in Education
• Inequity in outcomes
• Inequity in access to services and subsidies
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Richest 20 percent
0 2 4 6 8 10
Egypt 1995-96
Philippines 1998
India 1992-93
Bolivia 1997
Kenya 1998
Brazil 1996
Mozambique1997
Mali1995-96
Grade
Median grade attained by 15-19 year olds:
Inequalities in education outcomesInequalities in education outcomes
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0 2 4 6 8 10
Egypt 1995-96
Philippines 1998
India 1992-93
Bolivia 1997
Kenya 1998
Brazil 1996
Mozambique1997
Mali1995-96
Grade
Median grade attained by 15-19 year olds:
Inequalities in education outcomesInequalities in education outcomes
Poorest 40 percent
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Brazil 1996
0
20
40
60
80
100
1 3 5 7
Grade
9
India 1992-93
0
20
40
60
80
100
1 3 5 7 9
Grade
Indonesia 1997
0
20
40
60
80
100
1 3 5 7 9
Grade
Percent of 15-19 year old cohort that has completed each grade
Patterns of educational attainment across countriesPatterns of educational attainment across countries
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Brazil 1996
0
20
40
60
80
100
1 3 5 7 9
Grade
India 1992-93
0
20
40
60
80
100
1 3 5 7 9
Grade
Indonesia 1997
0
20
40
60
80
100
1 3 5 7 9
Grade
Percent of 15-19 year old cohort that has completed each grade
Poorest 40 percent Richest 20 percent
Patterns of educational attainment across countries
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Proportion of Public Subsidy Received by Poorest Quintile
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Colomb Kenya Ghana Indones Malaysia
Primary
Secondary
Tertiary
Colom: 92; Kenya: 92/3; Ghana 91/2; Indon, Malay 89
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Market Failures in Education• All levels of education have high private
returns.
• But social returns vary:– Primary education high:
• Strong externalities
• Strong equity effects
– Higher education probably low:• capital market failures
• Weak externalities except for research
• Costly for the public sector to produce
• Weak equity effects
• Technical education: weak; Secondary: ???
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Tertiary is more costly than primary education
05
101520253035404550
Africa Brazil
Unit cost oftertiary overprimary
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Directions for reform
• Re-think role of government: private-public; fiscal costs.
• Reorient public investment to primary education; be selective in higher levels (better targeting, user chgs)
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Allocation of Education Budgets
Korea Venezuela
As % of GNPPub Exp on: All Educ Basic Educ
3.02.5
4.31.3
As % of BudgetPub Exp on: Higher Educ Basic Educ
10.383.9
43.431.0
Econ Growth1980-91 (%) 8.7 -1.3
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Misallocation within subsectors: system-wide
• Poor quality, diagnosed as low levels of non-salary inputs: lack of texts, materials
• High unit costs– little incentive to minimize costs– teachers also lack incentive to perform well
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Private Schools deliver better education at lower cost
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Colomb Dom Rep Phils Tanzania
CostAchieve.
Ratio of private to public cost and Achievement
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Enrollment in Slums in Lahore• Data: 1,000 HHs in 26 slum areas
• % of children in HHs living on less than $1/day: 55%
0102030405060708090
Bot 14% Next41%
Top 5% All
No schoolPrivatePublic
Percent of Children Enrolled in Lahore by Income Group, School type
Alderman, Orzem and Paterno, “School Quality, Cost and Public/Private School Choice of Low Income HHs in PakistanWP 2, Impact Evaluation of Education Reforms, DECRG, World Bank 1996
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Addressing Implementation and Governance
• Private-public partnerships
• Decentralization
• Demand-side financing
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Decentralization of education
Pros• Devolves
responsibility to where there is most inform.
• More flexibility in meeting local needs
• Motivates users to be involved in delivery
Cons• May lead to inequity• may be too onerous
for those with low admin capcacity
• may lead to scale diseconomies
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Decentralize to where?
• Center
• Region
• State/Province
• District/Municipality
• Neighborhood/facility (school or clinic)
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Decentralize which function?• Set educational structure• Set curriculum• Formulate pedagogical plan• Hire/fire teachers• Hire/fire administrators• Promotions• Set class hrs by subject• Select textbooks• Evaluate students• Set fees, etc. etc.
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Decentralization: General Lessons
• No firm evidence that decentralization to other tiers of government leads to efficiency gains that counteracts equity losses.
• Most of the evidence on gains is decentralization to facilities or local neighborhoods (school based management, etc.)
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Two Cases of Education Decentralization
El Salvador• School governance to
community associations: hire/fire teach, adm gov funds
• Members elected from community
• Legally responsible for operations
Nicaragua• School governance to
school council• Members include
director, teachers, parents
• Addn’l resources retained at schools
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Decentralization: Lessons from 2 cases
• Decentralization does not lead to worse student performance; but evidence on gains depends on other factors.
• Decentralization leads to greater participation by parents and associations in school governance; this leads to better teacher performance and student gains in achievement.
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El Salvador Achievement Results
0.45
2.17
-0.77
0.74
-1
-0.5
0
0.5
1
1.5
2
2.5
Math Language
WithoutWith
Without: w/o school input and community participation variables; * Significant at 5%Values are in terms of Raw Scores (Averages are 4 and 2)
*
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EDUCO Effect on School days missed due to teacher absence
-0.35
-1.45
-1.09
-1.60
-1.40
-1.20
-1.00
-0.80
-0.60
-0.40
-0.20
0.0091-94 95 96Avg # of days
missed: 1.34
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011.522.533.544.55
EDUCO Traditional
00.51
1.52
2.53
3.54
4.5
EDUCO Traditional
Hours/month teachers meet with parents
Number of ACE visits to the classroom
• Local participation
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Countries where enrolment ratios have declined in the 1980s
• Benin
• Guinea-Bissau
• Ghana
• Mali
• Sierra Leone
• Nigeria
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Definitions of Mechanisms• Stipend
• Community Financing
• Targeted Bursaries
• Vouchers
• Public Assistance to Private Schools
• Student Loans
• Community Grants