Issues in Education PERs and Modeling Fiscal Implications of Education Policies Sajitha Bashir May 3, 2006

Today’s Agenda Introduction Part 1 Issues in Education Public Expenditure Reviews Part 2 Modeling the fiscal implications of education policies

Why analyze public spending in education? Poverty reduction strategy requires programs/policies that Augment labor force productivity Enhance quality of life Education contributes to both objectives But other programs are also required And resources are constrained

Is there a rationale for public funding? Should government finance education? Externalities: health/fertility/citizenship/gender Non-competitive markets: small rural communities Information asymmetries: illiterate people can’t judge quality Improve equity: rectify historical injustices Even if justified in general, does not mean all expenditures on education are justified Do sectoral objectives and expenditures relate to justifications?

Is there a rationale for public provision? Public funding may be justified but is it better to use private sector as provider? provide per pupil subsidies to private schools Subsidise teacher salaries? Vouchers? If public provision is justified, are public programs effective/efficient? Can outcomes be improved by changing size and distribution of allocations?

Private Provision and Financing PERs should take into account Extent of private provision by level of education (usually high for secondary/tertiary) Reasons why private sector does not exist Equity implications of private provision Private costs to households of accessing public educational institutions Students spend on textbooks/tutoring