Pro-Poor
Spending
PREM Learning Week,
June 19, 2002
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
Content
1.
2.
What is Pro-Poor Spending?
Who benefits from public spending?
1. Benefit Incidence Analysis
2. Incremental incidence analysis
3. Targeting and coverage
3.
4.
5.
How much spending actually reaches the poor?
Does spending help the poor?
Concluding Remarks
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 can’t
attend school since they are sick or malnourished? (synergies)
 Primary education expenditure to draft a new curriculum?
1.

Pro-poor expenditures
A.
B.
C.

What is ‘Pro-Poor Spending’?
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
Content
1.
2.
What is Pro-Poor Spending?
Who benefits from public spending?
1. Benefit Incidence Analysis
2. Incremental incidence analysis
3. Targeting and coverage
3.
4.
5.
How much spending actually reaches the poor?
Does spending help the poor?
Concluding Remarks
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.)
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)
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”)
Madagascar Distribution of Public Schooling, 1999 (Glick and
Razakamanantsoa, 2001)
1.0
Cumulative share of benefits
0.9
0.8
0.7
0.6
0.5
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
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
Distribution of Primary Education
quintil
% of total enrol- $US, 000
ments
_______________________________________
1
2
3
4
5
•
22
23
23
17
15
4,400,000
4,600,000
4,600,000
3,400,000
3,000,000
Add monetary values across services to assess larger part of
budget
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
2. Expenditure per capita / income per capita is
welfare indicator
… but this treats large and small families alike – no
economies of scale in consumption assumed
Many assumptions made….
3.
…
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
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….
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
group
monetary
benefit
malnutr.& poor
malnour. & non-poor
non-malnuri & poor
non-malnur. & non-poor
38.0
22.3
15.9
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
_
p.c. health to districts
468 - 1707.2
1707.2 - 2216.1
2216.1 - 2639.2
2639.2 - 4040.8
4040.8 - 13777.3
district poverty incidence
0.191
0.566
0.696
0.766
0.833
- 0.566
- 0.696
- 0.766
- 0.833
- 0.946
p.c. education to districts
727.9 - 2496.9
2496.9 - 3785.8
3785.8 - 4606.4
4606.4 - 5494.4
5494.4 - 13522.3
district poverty incidence
0.191
0.566
0.696
0.766
0.833
- 0.566
- 0.696
- 0.766
- 0.833
- 0.946
Content
1.
2.
What is Pro-Poor Spending?
Who benefits from public spending?
1. Benefit Incidence Analysis
2. Incremental incidence analysis
3. Targeting and coverage
3.
4.
5.
How much spending actually reaches the poor?
Does spending help the poor?
Concluding Remarks
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
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)
Incremental distributions
Quintile specific incidence
poor
rich
Average incidence
Incremental distributions
•
•
Second possibility: compare two cross-section
households surveys
Surveys have to be comparable
•
•
•
regional definitions/boundaries
Population
Welfare measure (if employed)
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)
Incremental incidence
Peru: Distribution of new access to public services
water
electric. sanitation
___________________________________________
1
2
3
4
5
20
25
21
18
15
----(100)
18
25
18
20
18
------(100)
18
24
20
18
19
-----(100)
Strong assumption: little upward and
downward mobility
Content
1.
2.
What is Pro-Poor Spending?
Who benefits from public spending?
1. Benefit Incidence Analysis
2. Incremental incidence analysis
3. Targeting and coverage
3.
4.
How much spending actually reaches the poor?
Does spending help the poor?
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
Targeting and Coverage
Peru 1997: Most of the large infrastructure programs
have low targeting and low coverage results
Graph 19: Coverage and Targeting in Peru, 1996
share of tot. exp. to bottom 40%
•
60
50
Fonavi
40
INFES
Pronaa
Foncodes
30
20
COOPOP
BanMat
10
ENACE
0
0
2
4
6
8
10
coverage rate of bottom 40%
12
14
16
Beyond Targeting
Targeting, Coverage and Expenditure Outlay
100%
Solid Waste
Basic Health
Water
80%
Basic Education
Sewage
60%
Kindergarten
40%
Favela Bairro
Bolsa Alimentar
20%
0%
0%
20%
40%
60%
80%
100%
Targeting (size of bubbles represents per-family cost or benefit)
Content
1.
2.
What is Pro-Poor Spending?
Who benefits from public spending?
1. Benefit Incidence Analysis
2. Incremental incidence analysis
3. Targeting and coverage
3.
4.
5.
How much spending actually reaches the poor?
Does spending help the poor?
Concluding Remarks
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
PUBLIC EXPENDITURE TRACKING AND SERVICE DELIVERY SURVEYS
Outcomes
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)
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
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
--------------------------------------------------------------------------------------
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)
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
-------------------------------------------------------------------------------
Content
1.
2.
What is Pro-Poor Spending?
Who benefits from public spending?
1. Benefit Incidence Analysis
2. Incremental incidence analysis
3. Targeting and coverage
3.
4.
5.
How much spending actually reaches the poor?
Does spending help the poor?
Concluding Remarks
Does Spending help the Poor?
•
Project or program evaluations – what would the situation have
been if the expenditure/intervention 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
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