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Economics of Education II: Intermediate Economic Analysis of Education Sector Projects

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.

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Economics of Education II: Intermediate Economic Analysis of Education Sector Projects

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  1. Economics of Education II: Intermediate Economic Analysis of Education Sector Projects Fiscal Impact Analysis Peter Moock

  2. Economic Analysis of Projects • effectiveness analysis • cost-effectiveness analysis • cost-benefit analysis • discounting • net present value • rate of return analysis costs benefits

  3. Internal Rate of Return • discount rate that equates project costs and benefits • compare alternative projects • profitable investment, yes, but affordable? costs benefits

  4. “Social Rate of Return” Capital market imperfections External costs External benefits Private rate of return Rationale for public sector involvement Social rate of return

  5. Financial Analysis 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?

  6. Decentralized Financial Analysis

  7. Incidence analysis 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?

  8. Fiscal AnalysisExamples • 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

  9. VietnamEducation Financing Sector Study (VEFSS) • Published as World Bank Country Study, “Vietnam Education Financing,” Washington, DC, 1997 (ISBN 0-8213-4023-9).

  10. VietnamEducation Financing Sector Study (VEFSS) 1. Demographic and macro-economic context 2. Education and training sector 3. Education expenditure and finance 4. Unit costs and internal efficiency 5. External efficiency and equity 6. Future directions for education finance • Vietnam in relation to HPAEs • Enrollment projections and fiscal affordability • Promising policy options

  11. 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)

  12. VEFSS

  13. VEFSSExpenditure 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

  14. VEFSS

  15. 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 VEFSS - study recommendations

  16. VEFSS

  17. VEFSS

  18. LesothoSecond 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

  19. LesothoSecond Education Sector Development Project • project costs - $25 million • IDA funding - $19 million • four components 1. ECD - $0.5 2. Primary/Secondary - $23 (IDA $19) 3. TVET - $1 4. NFE - $0.5

  20. 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 Lesotho - Project Component 1Early Childhood Development

  21. 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 Lesotho - Project Component 2Primary and Secondary Education

  22. 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 Lesotho - Project Component 3Technical and Vocational Education and Training

  23. 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 Lesotho - Project Component 4Non-formal Education

  24. Lesotho - Policy Simulation ModelScenario 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

  25. 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)

  26. Lesotho - Scenario I

  27. Lesotho - Scenario I

  28. Lesotho - Scenario I

  29. Lesotho - Scenario I

  30. Lesotho - Scenario I

  31. Repetition rates fall more rapidly Otherwise same as Scenario I Lesotho - Scenario IIUPE with reduced repetition

  32. Lesotho - Scenario IIIFree 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

  33. Lesotho - Comparison of 3 Scenarios

  34. Lesotho - Comparison of 3 Scenarios

  35. Lesotho - Comparison of 3 Scenarios

  36. Lesotho - Policy Simulation ModelAssessment

  37. IndonesiaSulawesi 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

  38. IndonesiaSulawesi 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

  39. IndonesiaSulawesi and Eastern Islands Basic Education Project • project costs - $71 • IBRD funding - $48 • IDA funding - $16 • four components 1. Crisis Relief - $30 2. Institutional Reform - $8 3. Quality Improvements - $27 4. Project Management - $6

  40. 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 Indonesia - Project Component 1Crisis Relief

  41. 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 Indonesia - Project Component 2Institutional Reform

  42. 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 Indonesia - Project Component 3Quality Improvements

  43. 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

  44. Indonesia- Fiscal Impact Analysis Projected growth of basic education budget

  45. Indonesia - Maluku

  46. Indonesia - Maluku

  47. Indonesia - Maluku

  48. Indonesia - Maluku

  49. Indonesia - Maluku

  50. Indonesia - Fiscal Impact AnalysisAssessment

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