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Benefit Incidence of Public Education, Health and Welfare spending in Thailand

Research Paper (undergraduate) 2013 18 Pages

Politics - International Politics - Region: South Asia

Excerpt

Table of Contents

Abstract

Acknowledgement

1. General Overview

2. Research Questions
2.1 Research Objectives

3. Methodology of Benefit Incidence Analysis

4. Empirical Evidence
4.1 Income Distribution by class and household characteristics
4.2 Distributional Effects of Public Spending by Functional Areas
4.3 Post –Expenditure income distribution

5. Policy Recommendation

REFERENCE

APPENDIX

Abstract

In this paper, there is an attempt to compile evidence on the benefit incidence of public education and health spending in 2005 in Thailand. The 2005 data marks an improvement over Medhi Krongkaew’s 1979 analysis due to changes in the creation of the quintile income groups and marked improvement in the data collected on the whole. This paper is used to ascertain which income groups tend to benefit more from social spending. The paper also explores the relationship between benefit incidence on the one hand and indicators of access to education and health services and social outcomes on the other using simple measures of association. In addition, the paper explores the policy implications of these findings. In general, there is an attempt to enhance the position of the poor as the total (all) post-expenditure saw a major improvement in the Gini coefficient to record 0.2818 from 0.3056 or a rate of improvement of 2.38%. On the basis of these findings, it could be concluded that government’s interventions or subsidies on the two functional areas is pro-poor or progressive as it seeks to favor the poor. This will enhance the position of the poor as to accessing these two facilities in Thailand. We make a number of policy recommendations to enhance government’s efforts in eradicating poverty in the not distant future.

Acknowledgement

I am very grateful to Prof. Pornlapat Buracom, the lecturer for Fiscal and Monetary Policy Analysis and Management (DA 841), at the National Institute of Development Administration (NIDA). This research program would not have been possible without the well taught lectures and materials provided by Prof. Pornlapat Buracom, who doubles as the Director of International program at GSPA. The same appreciation goes to Prof. Suchitra, and Prof. Nuttakrit co-lecturers of Quantitative Analysis for the expert work done in exposing students to the intricacies of doing a good quantitative research with SPSS and Excel spreadsheet. This research program would not have also been possible without the contribution of my colleagues in class. To the Teaching Assistant, Mr. Rodwell Mzondi from Malawi, I say big thank you for the information and additional insight shed on the course. I also wish to acknowledge the endless efforts of the PhD administrative staffs of GSPA for their excellent administrative contributions to making this course a success.

1. General Overview

Poverty as a social canker has been one of the challenges of governments across countries. The quest to ameliorating and eradicating this menace calls for several interventions from governments and other development partners. Government subsidies for the provision of basic services such as health, education etc has been established on grounds of equity and efficiency, because these are the main tenets and constituents of what makes an individual or a group poor. The poor have had limited access to basic services that continues to thwart efforts that could enable them to escape from the trap of poverty, hence the need for governments to intervene in ensuring the provision of these services to the poor. However, several questions arises as to how to figure out the extent to which either the increased allocation or the existing allocation is reaching the poor. Are the poor really benefiting from such allocations? How can such benefits be measured?

Benefit incidence analysis (BIA) is a tool that addresses this question by bringing together elements of the supply of and demands for public services and can provide valuable information on inefficiencies and inequalities in government allocation of resources for social services and the public utilization of these services. Benefit Incidence Analysis (BIA) is undoubtedly one of the easy to use tools for ex ante design as well as ex post monitoring and evaluation of the effectiveness of social spending programs. An assessment of the BIA typically involves a number of ways. To begin, one has to find the average the unit cost of providing public services (education or health) is obtained by dividing government spending on the service by the total number of users of the service. Secondly, the average benefit from government spending on a service is simply equated with the average unit cost of providing the service. The population of users is ranked from poorest to richest using welfare measure and aggregated into groups with equal numbers of users. The distribution of benefits across groups is obtained by multiplying the average benefit by the number of users of the service in each income and consumption group. The resulting distribution of benefits is compared with a number of benchmark distributions (Hamid et al, 2010).

BIA suffers from a number of limitations. The tool suffers from weak conceptual framework by representing an equilibrium outcome of government and household decisions. It fails to specify a model underlying the behaviour of either government or households. BIA uses the cost of providing public services as a measure of the value attributed to such services. In this way, BIA thus makes a strong assumption that the costs of provision are a good approximation to the benefit that users attach to government services. BIA does not cover the entire cost of providing public services (e.g. cost of administration and non pecuniary etc). In addition, BIA captures at best benefits incidence of government spending at a point in time, meaning BIA measurement is static and not dynamic. BIA estimates usually represents average incidence, failing to acknowledge on information on those who benefited from expansion or contraction in government spending.

2. Research Questions

In this paper, our focus is to find answers to the following questions;

- Who are the beneficiaries of government social welfare intervention or subsidies?
- Who are the poor?
- Are the poor really benefiting from governments interventions?
- How can such benefits be measured?

2.1 Research Objectives

Briefly, this paper seek

- To analyze the distributional effects of public education, health and social welfare spending by using benefit incidence analysis

3. Methodology of Benefit Incidence Analysis

In the literature, 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. Likewise, BIA shows how the initial “pre-intervention” position of individuals is altered by public spending or how well public spending serves to redistribute resources to the poor (van de Walle 1995). Put differently, 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 (Sabir 2003).

Benefit incidence thus depends on the household/ individual behavior on the use of the government service and composition of government spending. Benefit incidence studies also assume that the value to consumers of a public service can be identified by the cost of providing it. They then assign benefits to the users of the service ranked by some agreed measure of current welfare. This provides a profile of the distribution of the specific category of public spending across the distribution of the chosen welfare indicator (Rosario et al, 2008).

One way to assess the targeting of government subsidies is with reference to the graphical representation of the distribution of benefits, i.e., concentration curve or benefit concentration curve. A concentration curve is generated by plotting the cumulative distribution of “benefits” of public spending on the y-axis against the cumulative distribution of population sorted by per capita income on the x-axis. One can assess the progressivity or regressivity[1] of a public subsidy by comparing the benefit concentration curve with the 45-degree diagonal and the Lorenz curve of income/ consumption[2]. The diagonal indicates neutrality in the distribution of benefits. If the distribution of benefits lies along this line, the poorest 10 percent of the population gets 10 percent of the subsidy (could be income or consumption); poorest 20 percent account for 20 percent of the subsidy; and so on. Thus, the diagonal reflects perfect equality in the distribution of benefits and it is also referred to as perfect equality (PE) line (ibid).

[...]


[1] Progressivity implies a preference for lower income groups while regressivity implies a more favorable

treatment of higher income groups

[2] Lorenz curve is a graphical depiction of the cumulative distribution of income on the y-axis against the

cumulative distribution of population on the x-axis

Details

Pages
18
Year
2013
ISBN (eBook)
9783656421733
ISBN (Book)
9783656422174
File size
545 KB
Language
English
Catalog Number
v213306
Institution / College
National Institute of Development Administration
Grade
Tags
Benefit incidence Public spending on Education Progressivity Regressive Thailand Gini Coefficient

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Title: Benefit Incidence of Public Education, Health and Welfare spending in Thailand