Benefit Incidence Analysis on Thailand

Introduction

Social welfare spending in Thailand particularly on education and health services is regarded as one of the effective instruments used to reduce inequality in income distribution and reduce the poverty (Buracom, 2011). It is often asserted by policy makers in developing countries that markets do not work well for the poor, and that public subsidies on education and health would correct for market imperfections and produce positive externalities. It is also argued in the literature that better health and basic education have spill over effect that contribute to economic growth, improve the lot of the poor and their chances for employment. Developing countries generally maintain the pro-poor public spending on education and health for providing the benefits to the poor people of the country (Gafar, 2006).

Benefit incidence analysis^[1] (BIA) is a method of computing the distribution of public expenditure across different demographic groups, such as women and men. The procedure involves allocating per unit public subsidies (for example, expenditure per student for the education sector) according to individual utilization rates of public services (Al-Samarrai ,2007 ; Cuenca, 2008; Pearson, 2002; van de Walle 1995). It is a tool used to assess how tax policy or government subsidy affects the distribution of welfare in the population. In other words, it evaluates the distribution of government subsidies among different groups in the population, in particular, most of benefit incidence analyses divide the population into sub-groups (e.g. quintiles or deciles) based on household per capita income. Since expenditures on health and education are expected to have a redistributive impact, BIA is centered on assessing whether public spending is progressive, that is, whether it improves the distribution of welfare, proxied by household income or expenditure. It estimates how much the income of a household would have to be raised if the household would fully pay for the subsidized public services (Cuenca. 2008).

This research will analyse the effects of public spending of education and health on income distribution which will examine the pre-expenditure and post-expenditure income distribution. The following structure will be followed:

illustration not visible in this excerpt

Figure-1: Structure of research on pre and post expenditure

Source: Class Lecture of Professor Ponlapat, 2013

In order to present and compare the result I will analyse the income share of households and calculate the Gini coefficient of Thailand before the government expenditure on education and health. The Second stage will be the detailed calculation of public expenditure on primary, secondary, tertiary education and primary, secondary health services. In the third stage I will calculate the household income distribution to what extend it increases or decreases after the public spending. Finally the calculated Gini will be provided with explanation.

Objective of the Study

The objective of the research paper is to examine how the benefits of public spending on education and health services are distributed in the Thailand. Particularly, how public expenditure on education sector is distributed effectively in terms of primary and secondary education or higher education and whether every group rich or poor or both receives same benefit. Similarly, distributional effect of public expenditure on primary and secondary health care will examined which group are benefited and how. On the basis of distributional effects of education spending and health spending, policy recommendations have been stated here at the end of the paper.

Significance of the Research

This is systematic research on how benefit incidence can be calculated and recommend to the government to take pertinent actions. The policy analysis can get the thorough theoretical and practical idea from this research. As student of development administration will be able learn the techniques and utilize effectively. This research is about the identifying the distributional effect of public spending on education and healthcare services on Thailand. The researchers, policy makers, experts can easily identify the real beneficiaries of public expenditures and can get the idea of inequality whether it increases or decreases from the Gini coefficient and lowrenz curve. This study provides the way out for policy makers with apposite further policy initiatives.

An Overview of Education System and Health Care Service in Thailand and Public Spending

Education System in Thailand

Thai government emphasizes on education and has adopted policies particularly after the enactment of the National Education Act of 1999 which shows the way of taking reform initiatives. Following the reform activities, there are various types and methods of learning offered to learners regardless to their economic, social and cultural backgrounds. Education approaches provided in Thailand are classified as formal, non-formal, and informal. All types of education can be provided by educational institutions as well as learning centres organized by individuals, families, communities, professional bodies, religious institutions, welfare institutes; and other social institutions (OEC 2007). However, formal institutions create a significant change in the society for which government establishes institutions and spend more. Since the proportion of poor and middle income class is quite noticeable, Thai government tries to minimize the gap between rich and poor by taking measures for initiatives.

During the last few decades starting from 1951 till date there has been a remarkable change in this sector. Thai government has taken reform initiatives and increased spending. This has been made in order to minimize the knowledge gap and encounter the structural problem of inequality (Sagarik, 2012). Here is an overview of education policy/programs over the periods. During 1951-1967, Thai government expanded the length of compulsory education from 4 years to six years with an objective of providing publicly subsidized basic education in all public schools in order to increase access to students from low-income families. This policy initiative emphasizes on improving rural access to education particularly in the provincial level (Buracom, 2011; Sagarik, 2012). During 1977-1991, Thai government emphasized on few things, such as expansion of basic education, school education in remote rural areas and promoting private sector investment in basic education. The government encouraged private sector initiatives so that government can spend more money for public schools in rural areas. From 1992 to 1996, The government, during this period of 15 years, expended the basic education from 6 to 9 years and emphasized on increasing the access of students to the lower secondary education. After the Financial Crisis in 1997, Thai government kept on emphasizing on expansion of basic education and raised from 9 years of 12 years of free education and allocate more than 75% of entire education budget for basic education leaving the rest for higher education. Government also emphasized on an increase of cost recovery at tertiary level since rich people spend more on higher education. Another remarkable reform has taken place that the introduction of student loan program for students from low-income families in order to study in the upper secondary and tertiary level. However, experts remark that this initiatives brings to those group who have ability to pay back that does not bring much benefit to the group for whom it is emphasized. In 2009 the Thai government has taken initiative to expand the free education from 12 years to 15 years.

Education Spending in Thailand

From the education system and continuous reforms in this sector, it can be depicted that Thai government emphasized on education spending for increasing the demand to compete with the global need. Thai government is assumed that its prime responsibility for financing primary and secondary education. Most of the primary and secondary school students in Thailand attend in government primary and secondary schools. And the government has direct influence in this sector for assisting the poor group. It is seen that education spending in Thailand is the most public spending sector and emphasized in the Budget that is proved from the amount of expenditure. In 2010, Thai government allocated expenditure on education 283,187.3 million bath (Bureau of the Budget 2010). The distribution of spending by different levels (primary, secondary and tertiary) can determine the education attainment of the society. In terms of functional distribution, government allocates approximately 75 percent of its education budget on primary and secondary education, rest 25 percent on higher education. However, it is question whether this expenditure provides the right distributional benefits to poor or not. That will be researcher later. The overall public expenditure in Thailand can be seen in line graph:

illustration not visible in this excerpt

Source: Bureau of Budget, different years from 1998 to 2011

The line graph shows that Thai government increases the public expenditure on education in the annual budget each year following the incremental model. Detailed picture of category-wise education spending is stated in the appendice-1.

Health Care System in Thailand

Health care in Thailand has a long history of evolution for nearly half a decade until Thailand reaches the universal coverage for health care in 2002. As a percentage of GDP, Thai government increases the budget of health policy/programs. The major areas of public health spending are primary health program that includes health promotion and disease prevention and secondary health program that includes hospital services. Seven per cent of the total expenditure is spent for secondary services whereas only 30% is allocated for primary healthcare. There are some initiatives taken by Thai government over the period. Since 1975, for the better healthcare to be provided to the poor, government introduced several schemes such as low-income health card, voluntary health card, more allocation (about 10%) of health budget to Districts and Tambon hospitals. These programs created a good impact covering the 50% of total Thai population. In 2002 Thai government introduced a universal health insurance scheme with an objective to provide better facility to the people. This scheme covers 48 million people except those who are already covered by the social security schemes particularly for public and private employees.

[...]

^[1] BIA basically involves three steps: (i) array individuals or households by per capita income (or expenditures) and group by deciles or percentiles; (ii) compute estimate of unit subsidy of providing a particular type of government service as derived from official data on government spending; (iii) identify users of the government service (based on data on individual/household service utilization) and impute unit subsidy to said households or individuals (Demery 2000 cited in Cuenca, 2008).