Transcript Intermediate Economic Analysis of Education Sector

Economics of Education II:
Intermediate Economic Analysis
of Education Sector Projects
Fiscal Impact Analysis
Peter Moock
Economic Analysis of Projects
• effectiveness analysis
• cost-effectiveness
analysis
• cost-benefit analysis
– discounting
– net present value
– rate of return analysis
costs
benefits
2
Internal Rate of Return
• discount rate that
equates project costs
and benefits
• compare alternative
projects
• profitable investment,
yes, but affordable?
costs
benefits
3
“Social Rate of Return”
COSTS
BENEFITS
Rationale for
public sector
involvement
PUBLIC
PRIVATE
External costs
Capital market
imperfections
External benefits
Private rate
of return
Social rate of return
4
Financial Analysis
COSTS
BENEFITS
PUBLIC
X
PRIVATE
Y
Fiscal impact analysis
What is the scope/justification for increased cost recovery?
How affordable are the public and private costs?
Is the project financially sustainable?
What are longer-term recurrent-cost implications of project?
5
Decentralized Financial Analysis
Central Local CommunGovt Govt munities Families
Costs
Benefits
6
Incidence analysis
PUBLIC
COSTS
BENEFITS
PRIVATE
WHO?
WHO?
Who are the winners? Who are the losers?
What are the benefits and the costs for the poor, the very poor?
Consistent with project objectives/rationale?
Consistent with equity (poverty alleviation) goal as well as
efficiency goal?
7
Fiscal Analysis
Examples
• Vietnam
– Education Financing Sector Study
– 1997 ESW
• Lesotho
– Second Education Sector Development Project
– 1999-2002
• Indonesia
– Sulawesi and Eastern Island Basic Education
Project
– 1999-2006
8
Vietnam
Education Financing Sector Study (VEFSS)
• Published as World Bank Country Study,
“Vietnam Education Financing,”
Washington, DC, 1997 (ISBN 0-8213-40239).
9
Vietnam
1.
2.
3.
4.
5.
6.
Education Financing Sector Study (VEFSS)
Demographic and macro-economic context
Education and training sector
Education expenditure and finance
Unit costs and internal efficiency
External efficiency and equity
Future directions for education finance
– Vietnam in relation to HPAEs
– Enrollment projections and fiscal affordability
– Promising policy options
10
Vietnam
Budget projection, 1994-2004
• GDP: about 10% per year (Revised
Minimum Standards Model)
• State Budget as percent of GDP: constant
at 26%
• Debt repayment: rise, then fall
• Recurrent spending as percent of State
Budget: fall from 83% to 73%
• Education’s share of recurrent budget:
constant at 13.3% (conservative)
11
VEFSS
Table 6.2. Projected GDP, State Budget and Allocations for Education and Training, 1994-2004
(in VND '000,000,000,000 at constant 1994 prices; 1994 actual, 1995 budgeted, 1996 projected)
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
A. GDP
170.3 186.5 204.3 223.7 245.0 268.3 293.7 321.5 352.0 385.3 421.8
B. State Budget (I+N)
44.2 45.6 47.2 59.8 65.0 70.8 77.0 83.9 92.6 99.8 109.8
C. State Budget as % of GDP
26% 24% 23% 27% 27% 26% 26% 26% 26% 26% 26%
D.
Interest payments
2.92 2.48 3.47 3.23 3.05 2.87 2.71 2.58 2.46 2.34 2.23
E.
Discretionary State Budget (B-D)
41.3 43.1 43.7 56.6 62.0 67.9 74.3 81.3 90.1 97.5 107.6
F.
E&T (ca. 12% of E and 3% of A) 5.01 5.28 5.29 6.81 7.36 8.06 8.83 9.66 10.65 11.50 12.62
G.
Education (71-73% of F)
3.63 3.85 3.83 4.91 5.25 5.75 6.29 6.89 7.56 8.15 8.90
H.
Training (27-29% of F)
1.38 1.42 1.46 1.90 2.11 2.32 2.53 2.77 3.09 3.35 3.72
I. Current State Budget
32.9 34.9 34.9 43.0 44.2 48.0 52.0 56.6 60.9 65.2 69.7
J.
Discretionary current budget (I-D)
30.0 32.5 31.5 39.8 41.2 45.1 49.3 54.0 58.4 62.8 67.5
K.
E&T (13.3% of J)
3.98 4.30 4.17 5.28 5.46 5.98 6.54 7.16 7.75 8.33 8.95
L.
Education (77.4% of K)
3.08 3.33 3.23 4.09 4.23 4.63 5.06 5.54 6.00 6.45 6.93
M.
Training (22.6% of K)
0.90 0.97 0.94 1.19 1.23 1.35 1.48 1.62 1.75 1.88 2.02
N. Capital State Budget
11.3 10.6 12.3 16.8 20.8 22.8 25.0 27.3 31.7 34.7 40.1
O.
E&T (9.1% of N)
1.03 0.97 1.12 1.53 1.90 2.09 2.28 2.50 2.90 3.17 3.66
P.
Education (53.8 of O)
0.56 0.52 0.60 0.82 1.02 1.12 1.23 1.34 1.56 1.71 1.97
Training (46.2% of O)
0.48 0.45 0.52 0.71 0.88 0.96 1.06 1.16 1.34 1.47 1.69
Memo Item:
GDP Deflator
100 119 130 139 148 157 166 174 183 192 202
Source:
World Bank estimates prepared by the East Asia 1 Country Operations Division using M OF data and the Revised
M inimum Standards M odel (see Annex 6.1, Tables 1, 5 and 6).
12
VEFSS
Expenditure Scenarios
• Baseline (no change) scenario
– driven by population projections
– GERs and unit costs at 1994 levels
• Plan scenario
– Govt (MPI) enrollment targets
– higher than Baseline -- by as little as 2% in case
of technical to 138% in case of vocational
13
VEFSS
Figure 6.4. Affordability of Two Enrollment Scenarios
10.0
9.0
VND trillion
8.0
7.0
6.0
Projected Budget
5.0
Plan Scenario
4.0
Baseline Scenario
3.0
2.0
1.0
0.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Fiscal Year
Sources: VEFSS Projections.
14
VEFSS - study recommendations
• Target subsidies to
basic and to poor
• Cost recovery in
tertiary
• Go slow with
vocational
• Reduce dropout and
repetition
• Quality enhancement
– monitor learning
– increase instructional
hours
– teacher upgrading and
regular in-service trng
– increase govt spending
on textbooks and
learning materials
15
VEFSS
Figure 6.6. Affordability of Increasing Instructional Hours
VND trillion
10.0
8.0
6.0
4.0
2.0
0.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Fiscal Year
Projected Budget
Plan Scenario with 40 percent increase in teachers' salaries
Sources: VEFSS Projections.
16
VEFSS
Figure 6.5. Shares of Education and Training Budget by Level/Type of E&T, 1994
and 2004
Other
100%
Post-Grad.
80%
Tertiary
Technical
60%
Vocational
40%
Upper Sec.
Lower Sec.
20%
Primary
0%
Pre-school
1994
Baseline 2004
Plan 2004
Full Reform?
1994 (actual shares) and 2004 (shares under alternative scenarios)
Source: VEFSS projections.
17
Lesotho
Second Education Sector Development Project
• “to increase the number of Basotho that
benefit from the education and graduate
with skills enabling them to meet labor
market demand”
• effective: 6/30/99
• expected closing: 12/31/02
18
Lesotho
Second Education Sector Development Project
• project costs - $25 million
• IDA funding - $19 million
• four components
1.
2.
3.
4.
ECD - $0.5
Primary/Secondary - $23 (IDA $19)
TVET - $1
NFE - $0.5
19
Lesotho - Project Component 1
Early Childhood Development
Component 1 - ECD
• “increase coverage and improve quality”
• phase I
– policy memo to define GOL and NGO roles
– feasibility study to explore attaching community-run
ECD centers to primary schools
– pilot models in two or more isolated districts
• subsequent phases - expand coverage
20
Lesotho - Project Component 2
Primary and Secondary Education
Component 2 - Primary and secondary
• “increase access and equity and enhance quality
and efficiency”
• six sub-components
1. curriculum and assessment
2. teacher development
3. physical construction
4. school-level management
5. targeted equity-based program
6. capacity building in planning, monitoring and evaluation
21
Lesotho - Project Component 3
Technical and Vocational Education and Training
Component 3 - TVET
• “improve efficiency and cost-effectiveness of
TVET system”
• Phase I
– policy and institutional framework for demand-driven
system
– skills needs assessment
• Phase II - investments identified in phase I
22
Lesotho - Project Component 4
Non-formal Education
Component 4 - NFE
• “improve quality of life for Basotho who have
missed out on formal schooling by equipping them
with skills”
• Phase I - define policies and priorities
• Phase II - investments defined in Phase I
23
Lesotho - Policy Simulation Model
Scenario I - UPE
• By 2010:
– all children enter school at age 6 and complete grade 7
(dropout from 7.5% to zero)
– primary repetition rate halved (from 20% to 10%)
– 60% of primary graduates enter secondary (up from 54%)
– secondary repetition rate halved (from 10% to 5%)
– secondary dropout rate also halved
24
Lesotho - Scenario I (continued)
• Also by 2010:
– primary student-teacher ratio fall from 48:1 to 40:1
– secondary student-teacher ratio increase from 25:1 to 30:1
– teachers' salaries remain constant in real terms
(incorporating step increases only)
– unit costs of classroom construction, books and other inputs
remain same in real terms
– higher education expenditure assumed to grow by 2.5%
annually in real terms
• Government expenditure to grow in
line with GDP growth (3% per annum)
25
Lesotho - Scenario I
Projected primary and secondary age
groups and enrollments - Scenario I
(thousands)
700.0
600.0
500.0
400.0
Pr. age group
300.0
200.0
Sec. age group
Pr. enrollment
Sec. enrollment
100.0
0.0
1996/97 2001/02 2006/07 2011/12
26
Lesotho - Scenario I
Gross primary and secondary enrollment
ratios and repetition rates - Scenario I
120%
100%
GPER
80%
GSER
60%
Pr. repetition rate
40%
Sec. repetition
rate
20%
0%
1996/97
2001/02
2006/07
2011/12
27
Lesotho - Scenario I
(Constant 96/97 Maloti, millions)
Government expenditure - Scenario I
3,000
2,500
2,000
Other govt expen.
1,500
Educ. recurrent
1,000
Educ. capital
500
1996/97 2001/02 2006/07 2011/12
28
Lesotho - Scenario I
Education's share of total government
expenditure - Scenario I
40%
35%
30%
25%
20%
15%
10%
5%
0%
1996/97
2001/02
2006/07
2011/12
29
Lesotho - Scenario I
Sub-sectoral shares of education budget Scenario I
100%
80%
60%
40%
20%
0%
1996/97
Primary
2001/02
Secondary
2006/07
Higher
2011/12
Other education
30
Lesotho - Scenario II
UPE with reduced repetition
• Repetition rates fall more rapidly
Secondary
repetition
Primary
repetition
1996/97 2001/02 2006/07 2011/12
Scenario I
19.9% 16.4% 12.5% 9.1%
Scenario II
19.9% 12.7% 6.1% 1.0%
Scenario I
9.5% 8.1% 6.0% 4.5%
Scenario II
9.5% 6.6% 3.7% 1.2%
• Otherwise same as Scenario I
31
Lesotho - Scenario III
Free primary education
• Government pay entire costs of textbooks, learning
materials and school maintenance
• Estimated to be Maloti 210 per student
• Assumes 3-year life span for textbooks
• Otherwise same as Scenario II
32
Lesotho - Comparison of 3 Scenarios
Education's share of total government
expenditure - scenarios I, II and III
50%
40%
30%
Scenario I
20%
Scenario II
Scenario III
10%
0%
1996/97
2001/02
2006/07
2011/12
33
Lesotho - Comparison of 3 Scenarios
Sub-sectoral shares of education budget
in 2011/12 - scenarios I, II and III
100%
80%
60%
40%
20%
0%
Scenario I
Primary
Scenario II
Secondary
Higher
Scenario III
Other
34
Lesotho - Comparison of 3 Scenarios
Index of projected education expenditure
(Scenario 2 = 1.00)
1.20
1.15
1.10
1.05
1.00
0.95
0.90
0.85
0.80
1996/97
2001/02
2006/07
2011/12
Scenario 1 Universal primary
education (UPE)
Scenario 2 - UPE
with reduced
repetition
Scenario 3a - Free
primary (books,
maintenance)
Scenario 3b - Free
primary, imple'd
gradually
35
Lesotho - Policy Simulation Model
Assessment
Indonesia
Sulawesi and Eastern Islands Basic Education Project
• “to mitigate the effect of the economic crisis
by
– maintaining enrollment rates and transition
rates for the poor
– preventing quality deterioration by ensuring
schools can meet essential operating and
maintenance costs, and
– realizing efficiency gains
37
Indonesia
Sulawesi and Eastern Islands Basic Education Project
• “and to support recovery and return to
medium-term education strategy of
– improving quality of basic education, and
– decentralizing educational planning,
management and implementation to districts
and below
• effective: 7/1/99
• expected closing: 4/30/06
38
Indonesia
Sulawesi and Eastern Islands Basic Education Project
•
•
•
•
project costs - $71
IBRD funding - $48
IDA funding - $16
four components
1.
2.
3.
4.
Crisis Relief - $30
Institutional Reform - $8
Quality Improvements - $27
Project Management - $6
39
Indonesia - Project Component 1
Crisis Relief
Component 1 - crisis relief
• Sulawesi (11%), Maluku (20%), Irian Jaya
(22%), Timor Timur (32%) - poverty rates in
parenthesis (national rate 11%)
• Scholarships to poor junior secondary school
students and families
• Special assistance to primary and junior
secondary schools serving poor communities
40
Indonesia - Project Component 2
Institutional Reform
Component 2 - institutional reform
• District plans for school rationalization and
consolidation
• Capacity assessment of district staff in MOEC,
MOHA, MORA and Bappeda with evaluation of
training requirements and determination of staff
relocation between agencies
• Monitoring and evaluation systems
41
Indonesia - Project Component 3
Quality Improvements
Component 3 - quality improvements
• District quality improvement plans
• Quality components from a positive list
–
–
–
–
–
school rehabilitation and maintenance
training of teachers and other staff
teaching and learning materials and equipment
incentives for teachers in rural, remote schools
matching grants for private schools
• At national level, establishment of Policy Reform
Working Group on Teachers
42
Indonesia - Historical Precedent
• structural adjustment of late 1980s Education sector not protected
• budget declined by 12 percent in real terms
between 85/86 and 89/90
• education expenditure from 4.13% to 2.74%
of GDP
• real expenditure on basic fell by 71%
• 85/86 level not regained until 96/97
43
Indonesia- Fiscal Impact Analysis
Projected growth of basic education budget
FY99/00 FY00/01 FY01/02 FY02/03 FY03/04 FY04/05
Base Case
0
0
2
2
4
4
High Case
1
2
4
5
6
6
44
Indonesia - Maluku
Maluku Base Case vs. High Case
120
80
60
Base case budget
High case budget
40
20
0
99
/0
0
00
/0
1
01
/0
2
02
/0
3
03
/0
4
04
/0
5
05
/0
6
Rp billion
100
45
Indonesia - Maluku
Fiscal impact of project in Maluku Base Case
100
80
60
40
20
Basic education
budget
Capital costs only
Capital plus
recurrent costs
0
99
/0
0
00
/0
1
01
/0
2
02
/0
3
03
/0
4
04
/0
5
05
/0
6
Rp billion
120
46
Indonesia - Maluku
100%
80%
60%
40%
Basic education budget
Project recurrent costs
Capital costs only
20%
0%
99
/0
0
00
/0
1
01
/0
2
02
/0
3
03
/0
4
04
/0
5
05
/0
6
Share of budget
Fiscal impact of project in Maluku Base Case
47
Indonesia - Maluku
Fiscal impact of project in Maluku High Case
100
80
60
40
20
Basic education
budget
Capital costs only
Capital plus
recurrent costs
0
99
/0
0
00
/0
1
01
/0
2
02
/0
3
03
/0
4
04
/0
5
05
/0
6
Rp billion
120
48
Indonesia - Maluku
100%
80%
60%
40%
Basic education budget
Project recurrent costs
Capital costs only
20%
0%
99
/0
0
00
/0
1
01
/0
2
02
/0
3
03
/0
4
04
/0
5
05
/0
6
Share of budget
Fiscal impact of project in Maluku High Case
49
Indonesia - Fiscal Impact Analysis
Assessment
Fiscal Impact Analysis
Summary