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Human development and public finances
Servaas van der BergDept of Economics,
University of Stellenbosch
Presentation to first ERSA Public Economics Workshop, Cape Town,
12 August 2009
Social delivery & accountability• Market process benefits from feedback
mechanisms: “Wrong” decisions punished, “right” decisions rewarded – this automatically enhances efficiency
• Public process lacks feedback mechanisms – efficiency is thus difficult to attain:– Political feedback mechanisms are often weak– Information asymmetry is usual condition, and measurement
difficult: • In market, aggregation of outcomes takes place through
prices• Even measurable outcomes of public services impossible to
aggregate (e.g. vaccinations, Aids information campaigns, heart transplants, ante-natal care)
– Thus need for accountability structures
Accountability in service delivery
Need to strengthen weak accountability relationships, set appropriate incentives (principal-agent problem)– Accountability between clients and providers (“short-
route”)– Accountability between citizens and policymakers, and
policymakers and providers (“long-route”)`
Policymakers
Citizens / Clients Providers
Based on: World Development Report 2003
Public spending health outcomes
Publicprovision
ofeffectivehealth services
Total
consumption
of effective
health
services
Public spendingon health
Compositionof
spending
Healthoutcomes
Strength of all links combined determine whether inputs translate into outputsSimilar in all social services
Based on: Filmer, Hammer & Pritchet
Bromberger, Government policies affecting the distribution of income, 1940-80, p.167:
“...those distributions of income in which we are primarily interested are determined by immensely complex processes in which government activity interacts with relatively autonomous initiatives and adjustments by 'the myriad forces of the market'. There does not exist a well-tested, widely-endorsed body of theory to model all of these processes. But it is clear that governments cannot readily control all of them, and there are limits to what governments may be able to do to change distributions. We must avoid assuming that if there is a change, or no change, government policy is responsible. Nor should we assume that government policies are either coherent or necessarily successful.”
SACMEQ Grade 6 Reading scores(SACMEQ mean 500, standard deviation 100)
582547 546 536 530 521 517
493 482 478451 449 440 429
0
100
200
300
400
500
600Se
yche
lles
Ken
ya
Tanz
ania
Mau
ritiu
s
Swaz
iland
Bots
wan
a
Moz
ambi
que
SOU
THA
FRIC
A
Uga
nda
Zanz
ibar
Leso
tho
Nam
ibia
Zam
bia
Mal
awi
Lowess regression on schools’ average maths score, SA & other SACMEQ countries
Lowess regression on schools’ average maths score, SA vs. other SACMEQ countries
•Poor SA children fare worse than equally poor children in other African countries in this sample•Moloi (DoE) finds most SA Grade 6 children’s Maths competency to be at Grade 3 level or below
Literacy score in PIRLS 2006
Only 22% of SA students reach low international benchmark (400)
% of Grade 4 (in SA, Grade 5) students below the low international benchmark (400) in PIRLS 2006
These are “very low reading achievers”, “at serious risk of not learning how to read” (Trong 2009)
Lowess regressions & scatterplot10
020
030
040
050
060
0M
ea
n s
cho
ol r
ead
ing s
core
-4 -2 0 2 4Mean school SES
African language schools All schoolsAfrikaans or English African language schools
Random guessing?
Not a single school tested in one of the African languages reached the low international benchmark of 400
African Eng / Afr
Coefficient on SES
16.5 80.6
R-squared 0.03 0.30
0
100
200
300
400
500
600
-2 -1.5 -1 -0.5 0 0.5 1 1.5 2Student SES
Pred
icted
read
ing
scor
e
African language English or Afrikaans
SES gradients by language of test
0.300.03R-squared
80.616.5Coefficient on SES
Eng / Afr
African
Gap 104
Gap 168
Gap 232
“Belgium”
“Indonesia”
This gap explains middle class black flight to historically white schools
Black matriculants, 1982 to 2007 (’000)Endorsements
(University exemptions)
Other matric passes
Total
1982 7 27 341992 34 117 151
2007 51 241 292
Growth rate p.a. 1982-1992
17.1% 15.8% 16.1%
Growth rate p.a. 1992-2007
2.7% 4.9% 4.5%
Potentially holds back economic growth and black social mobility
Improving school quality
More resources are less important than using existing resources better, i.e. improving school efficiency– Adding more teachers to dysfunctional
schools would not improve learning– Must overcome inefficiency of poor schools
to really address poverty and educational inequality
– Institutions and incentive structures are centrally important to this
Some public finance issues• Principal-agent problem & teacher pay• Public spending incidence versus benefit
incidence• Accountability & discretion of schools and
districts– Testing, terminal exams in primary schools
• Appropriate institutions• Provider absence & incentives (cf. Duflo)
• Costing of public hospitals• Perceptions about health quality