Intermediate Economic Analysis of Education Sector Projects

Appropriate Private-Public Roles:

Analyzing Interactions

Emmanuel Jimenez

22 February 2000

Analyzing Public-Private Interactions

• Game and General Lessons

• How should one analyze the private option in education projects?– Principles– Example from the Philippines

Q1: The figure below shows:a) Private education exp as % of total b) Public education exp as % of total

0% 50% 100%

Malaysia

Bolivia

GhanaUSA

Germany UgandaSierra Leone

Q1. The figure below shows:a) Private education exp as % of total b) Public education exp as % of total

0% 50% 100%

S. AfricaMalaysia

BoliviaFranceUK

VenezuelaGhanaUSA

Indon.German.

PeruUgandaSierra LeoneS. Korea

Netherlands

Q2. The figure below shows (secondary)a) Private education enrol as % of total b) Public education enrol as % of total

0% 50% 100%

USAAustraliaKorea Chile

Belgium

Netherlands

Q2. The figure below shows (secondary)a) Private education enrol as % of total b) Public education enrol as % of total

0% 50% 100%

MexicoUSANigerCyprus

KuwaitFrance

AustraliaKorea Chile

Belgium

NetherlandsMauritius

AnswersQ1: The figure below shows:

a) Private education exp as % of total

0% 50% 100%

S. AfricaMalaysia

BoliviaFranceUK

VenezuelaGhanaUSA

Indon.German.

PeruUgandaSierra Leone

Source: Psacharopoulos and Nguyen 1995 “Fighting Poverty: the role of government and the private sector” World Bank.

Netherlands

Answers Q2: The figure below shows:

a) Private education enrol as % of total

0% 50% 100%

MexicoUSANigerCyprus

KuwaitFrance

AustraliaKorea Chile

Belgium

NetherlandsMauritius

What Lessons?

• Public intervention through finance is different from provision

Options for InterventionDegree of public financing

100%

0% 100%Degree of public provision

Unsubsidized privatesector (Phils. Tertiary)

Voucher supportedschools; Regulatedpriv schools (Neth, Bel)

Public schools with no costrecovery (many)

Public facilitieswith cost recovery(US universities)

What Lessons?

• Public intervention through finance is different from provision

• It’s hard to generalize where the private sector may be large.

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

What Lessons?

• Public intervention through finance is different from provision

• It’s hard to generalize where the private sector may be large.

• All economic arguments for public intervention are for finance and NOT provision

Market Failures in Education

Characteristic• Excludable and Rival?• Externalities

– Productivity

– Nation-bldg, community

• Capital Mkt Failures

• None• Primary Levels

Research

• Higher Education

Price

Quantity0

Market for EDUCATION

privateMB

private MC

socialMB

Q* Q**

If there are no economic reasons for public schools, why are there

so many of them?• Regulatory capacity

• Political and social inertia

In this setting, what does it mean for project analysis?

• Get information on the private sector: size, who acceses, where.

• If there is political room to use public resources to expand private, – compare private-public alternatives– analyze regulatory vs provider capacity

• Even if politically infeasible to expand private, analyze the NET effect of public on quantity, quality, costs and equity.

Comparing Public and Private Options

• Comparisons of private-public must hold constant for socioeconomic characteristics

• Also must hold constant for selection

• Done for the Philippines in the 1980s using household-school matching survey.

Private Sec Schools deliver better education at lower cost

0

0.2

0.4

0.6

0.8

1

1.2

CostAchieve.

Ratio of private to public cost and Achievement

Estimating NET Impacts

What happens to quantity when the public sector expands?

• Build more schools:– attract more students who didn’t go to school– attract more students from private schools

• Increase subsidies:– attract more students into schools– cause private spending to decline.

Public as % of Total Enrollments, Philippines, 1982-1996

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

All Levels Elementary Secondary Tertiary

95% 93%

54%

69%

10%

21% 23%

77% 78%

How to Estimate the Effects

• Data: 1987-98 provincial data

• Regress: private secondary enrollment on: – population– regional domestic product– standardized test scores (public/private)– tuition (public/private)

Philippines: Effect of Enrolling 10 more students in public

secondary schools

-4

-2

0

2

4

6

8

Priv EnrlTot Enrl

Philippines: Effect of Enrolling 10 more students in public

schools

-2

0

2

4

6

8

10

12

14

Primary Tertiary

Priv EnrlTot Enrl