Public spending and outcomes: Does governance matter?

Andrew Sunil Rajkumar, Vinaya SwaroopWorld Bank, Washington, DC, United States

1. Latar Belakang• Pengalokasikan sumber daya publik secara berulang-ulang

untuk barang dan jasa yang baik tidak akan membawa hasil yang diinginkan jika institusi anggaran – diantaranya formula anggaran, eksekusi, dan monitoring – tidak berfungsi sebagaimana mestinya (World Bank, 2003).

• Pada literatur sebelumnya ditemukan bahwa pengeluaran publik ditemukan memiliki dampak yang rendah terhadap outcomes. Dua alasan yg sering dikemukakan:– Adanya substitusi sektor publik dg swasta– Kebocoran dan institusi yg lemah/manajemen penganggaran yg buruk

2. Kerangka Teori/Pemikiran• Teori ttg pertumbuhan endogen telah menghasilkan model yg

menghubungkan antara pengeluaran publik dg tk.pertumbuhan ekonomi jk panjang.

• Sejumlah penelitian ttg hub antara pengeluaran publik sektoral dg pertumbuhan ekonomi menghasilkan simpulan yg berbeda.– investasi publik dalam bidang transportasi dan komunikasi pada

negara berkembang berkorelasi positif dengan pertumbuhan dengan koefisien yang sangat tinggi (Easterly and Rebelo, 1993)

– pengeluaran modal – khususnya investasi publik pada sektor transportasi dan komunikasi – mempunyai korelasi negatif dengan pertumbuhan GDP real per kapita (Devarajan et al, 1996)

– terdapat sedikit hubungan antara pengeluaran publik bidang pendidikan dg outcomes bidang pendidikan (Hanushek , 1995, Mingat and Tan, 1992, 1998, dan Wolf,2004)

– hub antara pengeluaran publik dan status kesehatan masyarakat miskin lebih kuat pada negara berpendapatan rendah dibandingkan pada negara berpendapatan tinggi (Gupta et al, 2001)

– dg menggandakan pengeluaran publik dari 3 menjadi 6% dari GDP hanya akan meningkatkan tingkat kematian anak dari 9 menjadi 13%, artinya hubungan diantara 2 variabel adalah lemah (Filmer and Pritchett, 1999)

Yang menjadi pertanyaan:– Apa sebenarnya indikasi dari kecilnya hubungan antara pengeluaran

publik dg outcomes pembangunan?– Apakah pemerintah (kebanyakan di negara berkembang) melakukan

pengeluaran pada aktifitas yg tdk produktif?– Apakah seharusnya mereka tidak melakukan pengeluaran di bidang

pendidikan dan kesehatan?

• In explaining the negative link between capital spending and per capita growth, Devarajan et al. (1996) note that this may reflect a problem in the link between public spending and service delivery.

• notes that all of the negative or ambivalent findings on public spending could potentially be a reflection of differences in the efficacy of spending. These differences could arise due to a variety of reasons including corruption and patronage, and need not necessarily be attributed to bad economic policy (Pritchett, 1996)

• Yet another reason the link between public spending and outcomes could be broken is the displacement of private sector effort by public spending (Filmer et al).

The Governance, does it affect development outcomes?• Kaufmann et al. (1999) and Kaufman et al. (2004), show that governance

indicators (including voice and accountability, political stability and violence, government effectiveness, regulatory burden, rule of law and graft) have a strong direct negative impact on infant mortality.

• Gupta et al. (1999) find that countries with high corruption have high child and infant mortality rates.

• De La Croix and Delavallade (2006) find that countries with high corruption invest more in housing and physical capital in comparison with health and education. The associated rent seeking in physical capital hampers economic growth.

Efficacy of public health spending • Every country–rich or poor, developed or underdeveloped– undertakes

public health spending with a single dominant objective: to improve the health of its citizens. Different countries adopt different approaches to meet this objective. Some spend more public resources than others; some spend more on preventive than curative care; and some countries rely more on the private sector for service delivery. There is also wide variation in public health spending across countries, ranging from less than 1 percent to more than 8% of GDP.

Empirical specification

Dimana variabel untuk negara adalah i : • HS – Health Status yang diukur dengan tingkat kematian anak di bawah usia 5 tahun; • PCGDP – per kapita GDP diukur dengan paritas daya beli yang disesuaikan menjadi

dollars; • PHSGDP – share of public health spending (didefinisikan sebagai recurrent dan pengeluaran modal dari anggaran pemerintah [Pusat dan Daerah],

pinjaman luar dan grants) dari GDP; • G – sebuah ukuran kepemerintahan (indeks korupsi dan kualitas birokrasi)• X – a vector of non health related country spesific factors• B – a vector of capture coefficients of X• Ε – an error term

One could argue that outcomes in time t are not just affected by spending undertaken in that period, but also by spending taken in the previous years. Including the lagged spending variables, however, does not change our results.

– Data and choices of variables No Variable Definisi Data Sumber

1 HS Tingkat kematian anak

2 PCGDP Per capita GDP

3 PHSGDP Share pengeluaran bid kesehatan thd GDP

Pengeluaran publik bid kes

WDI, Bank Dunia

4 G Governance Kualitas birokrasi (0-4)Korupsi (0-6)

US Based Political Risk Services Group

5 X non health related country spesific factors

- ethno-linguistic fractionalization, - The percentage of the population that is Muslim,- the percentage of females aged 15 and above that are literate, -the percentage of the population living in urban areas, and - the Gini coefficient a measure of incomeinequality- the percentage of the population under the age of 5.

Empirical results

Empirical results

Empirical results

• Overall, our results in Table 2 support two basic hypotheses: (1) rich countries have lower child mortality; and (2) the link between public health spending and child mortality is negative, but the efficacy of public spending in lowering child mortality is positively related with the level of governance.

Measuring the efficacy of public education spendingEmpirical specification, data and choice of variables

• EF – Educational Failure; Proporsi dari mereka yang gagal menyelesaikan pendidikan sekolah dasar; diukur dengan kegagalan pendidikan;

• PCGDP – per capita GDP diukur dengan paritas daya beli yang disesuaikan dg dollars

• PESGDP – share of public primary school education in GDP• G – sebuah ukuran kepemerintahan (indeks korupsi dan kualitas birokrasi)• X – a vector of non health related country spesific factors• B – a vector of capture coefficients of X• ω – an error term

To be consistent with our mortality measures of the health sector, we use education non-attainment as our outcome measure

Empirical results

Empirical results

Empirical results - Efficacy of public spending at different levels of governance

Empirical results - Efficacy of public spending at different levels of governance

Empirical robustness

Empirical robustness

Conclusions

• The analysis above substantially improves our understanding of the links between public spending, governance, and outcomes. In particular, it helps explain the surprising result that public spending often does not yield the expected improvement in outcomes. Using data from a cross-section of countries covering 1990, 1997 and 2003, we found that As the level of corruption falls public health spending has a stronger negative impact on child mortality in countries that have good governance. or the quality of the bureaucracy rises, public spending on health becomes more effective in lowering child mortality. Our findings also indicate that in countries which are rated as very corrupt or are rated to have a very ineffective bureaucracy, public health spending at the margin will be ineffective. Similarly, increasing public spending on primary education is likely to be more effective in raising primary education attainment in countries with good governance.