Pro-Poor%20Spending%20PREM%20Learning%20Week,%20June%2019,%202002

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Pro-Poor Spending PREM Learning Week, June 19,
2002
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Key points

• No easy and unique way to define pro-poor
  spending and track it
• But quite a few tools exist to analyze
  relationship between public expenditures and
  poverty
• incremental analysis of poverty link of public
  expenditures start with some basic analysis but
  plan ahead for more elaborate one (data
  collection)
• Identification of pro-poor spending budget items
  should not lessen emphasis to look at how
  programs are delivered

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Content

• What is Pro-Poor Spending?
• Who benefits from public spending?
• Benefit Incidence Analysis
• Incremental incidence analysis
• Targeting and coverage
• How much spending actually reaches the poor?
• Does spending help the poor?
• Concluding Remarks

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1. What is Pro-Poor Spending?

• pro-poor spending widely used term in
  connection with PRSPs, HIPC etc. (country teams
  have the task of monitoring pro-poor spending)
• No easy and clear definition what pro-poor
  spending is
• Primary education spending if it goes primarily
  to the poor
• Primary education spending if it goes primarily
  to the non-poor but also reaches the poor?
• Primary education spending that goes to poor but
  only to very few?
• Primary education spending that goes to the poor
  but kids cant attend school since they are sick
  or malnourished? (synergies)
• Primary education expenditure to draft a new
  curriculum?

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1. What is Pro-Poor Spending?

• Pro-poor expenditures
• Spending that benefits the poor more than the
  non-poor
• Spending that actually reaches the poor
• Spending that has an impact on welfare of the
  poor over time
• Does not imply that other expenditure is
  necessary anti-poor e.g.
• expenditure on regulatory framework for private
  sector (spurring growth),
• Expenditures on anti-corruption agency

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Content

• What is Pro-Poor Spending?
• Who benefits from public spending?
• Benefit Incidence Analysis
• Incremental incidence analysis
• Targeting and coverage
• How much spending actually reaches the poor?
• Does spending help the poor?
• Concluding Remarks

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2.1. Benefit Incidence Analysis (BIA)

• BIA considers distribution of benefits from
  public services or programs among different
  groups in the population (by income precentile,
  by income quintile, by ethnicity, by geographic
  region, by malnourished, by illiterate etc.)

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2.1. Benefit Incidence Analysis

• Typically based on analysis of information from
  household surveys regarding
• utilization of education and health facilities
• infrastructure use (roads, water, electricity
  etc.)
• program access (nutrition programs, public works)
• consumption of specific goods (subsidized staple
  foods etc)
• Maps benefits of specific programs (e.g.,
  school enrolments) to socioeconomic groups e.g.
  by percentiles of the distribution of income /
  expenditures (welfare proxy)

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2.1. Benefit Incidence Analysis

• Makes a judgment of how well services are
  targeted or captured by the poor
• Progressive if benefit distribution is better
  than expenditure/income distribution
• Per capita progressive distribution of the
  benefits to the population (per capita
  progressive)

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Madagascar Distribution of Public Schooling,
1999 (Glick and Razakamanantsoa, 2001)
1.0
0.9
0.8
0.7
0.6
0.5
Cumulative share of benefits
0.4
0.3
0.2
0.1
0.0
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Cumulative share of sample, poorest to richest
45-Degree Line
Primary Education
Secondary Education
University
Per Capita Expenditures
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2.1. Benefit Incidence Analysis

• Translates distribution of enrolments in monetary
  terms by calculating the per student benefit
  total expenditure outlays on primary education
  (at all levels of Government) by total public
  primary school enrolment
• Add monetary values across services to assess
  larger part of budget

Distribution of Primary Education quintil
of total enrol- US, 000 ments
_______________________________________ 1 22
4,400,000 2 23 4,600,000 3 23
4,600,000 4 17 3,400,000 5 15
3,000,000
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Many assumptions made.

• 1. per unit cost or unit subsidy is benefit
• but cost of public provision must not be
  related to benefit to user (especially if
  rationed, externalities)
• assumes same quality for all students (rural,
  urban)
• assumes no leakage
• Expenditure per capita / income per capita is
  welfare indicator
• but this treats large and small families alike
  no economies of scale in consumption assumed

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Many assumptions made.

• Per capita expenditure of whole population used
  to
• map incidence of of schooling expenditures
• but poor families tend to have more children so
  that primary education expenditure might appear
  per capita progressive although enrolment rates
  of children in lowest quintile is lower than for
  rich

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Because of these caveats

• most often monetary value of benefit not
  attached when only utilization information is
  available (health, education) unless there is
  very detailed information about leakage
• important to assess likely direction of bias in
  incidence calculations (e.g., per unit benefit
  are the same in rural and urban areas overstates
  progressivity)
• If possible, conduct sensitivity analysis with
  respect to (i) economies of scale parameter (ii)
  target group (See Lanjouw et al., 2001, WPS
  2739)
• Key influence design and questions asked in
  household surveys when PER is coming up.

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BENEFIT incidence of malnutrition programs in Peru

• Peru LSMS survey (1997) had explicit question
  about the quantity and quality of nutritional aid
  received as well as market prices

Malnutrition Programs Distribution of Program
Benefits, 1997 monetary group
benefit malnutr. poor
38.0 malnour. non-poor
22.3 non-malnuri poor
15.9 non-malnur. non-poor 23.8
Distribution of resources malnourished
benefits _____________________________ Lima
8.9 31.6 Urb. Coast 6.9 8.8 Rur.
Coast 5.1 9.6 Urb. Sierra 7.7 5.3 Rur.
Sierra 51.3 31.9 Urb. Jungle 5.1 4.4 Rural
Jungle 15.0 8.4 _
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p.c. health to districts
district poverty incidence
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p.c. education to districts
district poverty incidence
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Content

• What is Pro-Poor Spending?
• Who benefits from public spending?
• Benefit Incidence Analysis
• Incremental incidence analysis
• Targeting and coverage
• How much spending actually reaches the poor?
• Does spending help the poor?
• Concluding Remarks

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Incremental distributions

• More important than average incidence is how new
  spending is distributed (since much of total
  expenditure envelope fixed, e.g. salaries)
• Two possibilities to look at increments
• Marginal incidence analysis with one very rich
  large cross-section household survey dataset
  (Lanjouw and Ravallion, 1999)
• Comparing two consecutive cross-section datasets

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Incremental distributions

• Lanjouw and Ravallion (Benefit Incidence and the
  Timing of Program Capture , WBER, 1999)
• Tradition BIA uses survey-based estimates how the
  odds of participation in various programs vary
  with welfare indicator
• Can well be that early program capture is
  pro-rich but later program capture is pro-poor
• Huge dataset for rural India where they were able
  to calculate 62 representative small area
  participation rates by income quintile and
  compare to average participate rate (controlling
  for other variables)

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Incremental distributions

• Quintile specific incidence

poor
rich
Average incidence
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Incremental distributions

• Second possibility compare two cross-section
  households surveys
• Surveys have to be comparable
• regional definitions/boundaries
• Population
• Welfare measure (if employed)

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Incremental Incidence (by area)

• by geographic area New investments in social
  infrastructure had an pro-urban bias

Peru New Access to Basic Services Urban Rural
________________________________________ Water
57 43 (100) Electric. 72
28 (100) Sanitat. 78 22 (100) Ambul.
Health 74 26 (100) School enrollment 33
67 (100) ________________________________________
memo poverty gap 47 53 (100)
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Incremental incidence

Peru Distribution of new access to public
services water electric. sanitation ___________
________________________________ 1 20 18
18 2 25 25 24 3 21 18
20 4 18 20 18 5 15 18
19 ----- -------
------ (100) (100) (100)
Strong assumption little upward and downward
mobility
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Content

• What is Pro-Poor Spending?
• Who benefits from public spending?
• Benefit Incidence Analysis
• Incremental incidence analysis
• Targeting and coverage
• How much spending actually reaches the poor?
• Does spending help the poor?

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Targeting and coverage

• Incidence analysis describes distribution of
  program benefits/utilization how well do
  expenditures reach the poor (targeting)
• Incidence analysis says nothing about coverage,
  hence reach among the poor

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Targeting and Coverage

• Peru 1997 Most of the large infrastructure
  programs have low targeting and low coverage
  results

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Beyond Targeting

• Targeting, Coverage and Expenditure Outlay

Basic Health
Solid Waste
100
Water
Basic Education
Sewage
80
60
Kindergarten
40
Favela Bairro
20
Bolsa Alimentar
0
0
20
40
60
80
100
Targeting (size of bubbles represents per-family
cost or benefit)
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Content

• What is Pro-Poor Spending?
• Who benefits from public spending?
• Benefit Incidence Analysis
• Incremental incidence analysis
• Targeting and coverage
• How much spending actually reaches the poor?
• Does spending help the poor?
• Concluding Remarks

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How much Spending Reaches the Poor?
Policy framework Govt. program PRSP Sector
strategies etc
Budget allocation
Outturn Timely disbursements in accordance with
budgeted allocations
Outputs
Impact
Outcomes
PUBLIC EXPENDITURE TRACKING AND SERVICE DELIVERY
SURVEYS
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Characteristics of PETS

• Diagnostic or monitoring tool to understand
  problems in budget execution
• Delays, predictability
• Leakages
• Discrection, due process
• Data collected from different levels of
  government, including frontline service delivery
  units
• Combines qualitative data (perceptions) with
• quantitative data from actual service units like
  primary health or primary education facilities
  (resource flows, availability of inputs, service
  outputs, management systems)
• Uganda found that only 13 percent of intended
  resources acutally reached schools (1991-1995)

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Service Satisfaction Surveys

• Questions about service satisfaction can be
  included in LSMS-type quantitative surveys or
  separate (report card in Bangalore, Simon Paul,
  or Philippines)
• Important to link service satisfaction to poverty
  group

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Service Evaluation in Cali

• service dissatisfaction
• 1 2 3 4 5 Total
• --------------------------------------------------
  --------------------------------------
• water 8.7 8.6 7.2 12.3 7.2 8.8
• garbage 9.2 7.7 10.1 12.8 11.2 10.2
• electricity 8.2 11.6 9.3 5.4 6.2
  8.1
• health 24.7 16.2 17.9 16.0 17.5 18.4
• education (stud.) 9.1 9.2 7.0 9.5 8.2
  8.6
• sewerage 33.8 23.1 21.9 26.0 20.1 25.0
• env. cleanliness 61.2 66.8 60.5 64.3 60.9 62.7
• --------------------------------------------------
  ------------------------------------

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Budget priorities in Cali, Colombia

• Cali Budget increase priorities (1999)
• 1 2 3 4 5 Average
• -------------------------------------------------
  ----------------------------------------
• education 31.3 30.9 29.2 32.3 34.8 31.7
• health 19.5 19.9 30.3 23.6 23.9 23.4
• income-generat. 18.9 22.2 18.6 18.7 19.8 19.7
• nutrition program 8.8 4.4 5.6 5.6 1.2 5.1
• social housing 10.4 11.7 8.4 5.8 5.5 4.8
• police 3.2 3.1 2.6 7.2 7.8 4.5
• ..
• Public Transport 1.4 0.8 0.9 0.8 2.1 1.2
• Sports arenas 1.3 0.9 1.3 0.7 0.8 1.0
• -------------------------------------------------
  ---------------------------------------
• Source Cali Household Survey (1999)

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Budget Priorities in Cali, Colombia

• Cali Budget cut priorities (1999)
• 1 2 3 4 5 Average
• -------------------------------------------------
  ------------------------------
• sports arenas 33.9 21.1 34.3 33.6 35.9 33.9
• police 18.6 17.2 16.6 15.1 12.9 16.1
• public transport 18.2 12.9 12.9 17.5 18.0 15.9
• ..
• Water 2.8 1.0 1.1 0.7 0.3 1.2
• education 0.8 0.6 1.1 0.7 1.1 0.9
• health 0.9 0.2 0.4 0.8 0.5 0.6
• -------------------------------------------------
  ------------------------------

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Content

• What is Pro-Poor Spending?
• Who benefits from public spending?
• Benefit Incidence Analysis
• Incremental incidence analysis
• Targeting and coverage
• How much spending actually reaches the poor?
• Does spending help the poor?
• Concluding Remarks

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Does Spending help the Poor?

• Project or program evaluations what would the
  situation have been if the expenditure/interventio
  n had not taken place? Key is counterfactual
  comparison.
• Partial coverage programs compare treatment
  group to control or comparison group (people
  have same characteristics)
• Full coverage interventions comparison of
  population welfare before and after
• Monitoring and Evaluation Toolkit, e.g.
  Ravallion Argentina Trabajar, Schady
  Foncodes, Walle Rural Roads Vietnam
• Evaluating poverty impact of public investment in
  its entirety through CGE models or partial
  equilibrium models (see Fan, Hazell and Thorat,
  IFPRI)
• Panel data household survey analysis on effects
  on growth

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Key points

• No easy and unique way to define pro-poor
  spending and track it
• But quite a few tools exist to analyze
  relationship between public expenditures and
  poverty
• incremental analysis of poverty link of public
  expenditures start with some basic analysis but
  plan ahead for more elaborate one
• One household survey incidence
• Two surveys -- incremental incidence
• Tracking surveys
• Service satisfaction and budget priority survey
• Impact evaluations, cost-effectiveness analysis,
  PSIA etc.
• Identification of pro-poor spending budget items
  should not lessen emphasis to look at how
  programs are delivered