distributional impact of public expenditures in armenia shoghik hovhannisyan terry sanford institute...
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DISTRIBUTIONAL IMPACT OF PUBLIC EXPENDITURES IN ARMENIA
Shoghik Hovhannisyan
Terry Sanford Institute of Public Policy Duke University
Policy Question To what extent are the Armenian government’s
propoor public policies successful in targeting vulnerable groups of population?
What is the distributional impact of public expenditures on different income clusters?
How justified is the State participation at various institutional levels in education and healthcare?
Benefit Incidence Analysis (BIA)
BIA is a direct impact analysis of public expenditures
BIA involves a three-step methodology: 1. Aggregating households into the quintiles of
population
2. Imputing subsidies to household quintiles
3. Estimating gross benefit incidence including Health, Education and Poverty Family Benefits
Education
Education is one of the most crucial factor in avoiding poverty
Public expenditures on Education and Science have the highest share in total government expenditures- 13.6%
Analysis focuses on pre-primary, primary, college and higher education institutions
Budget mechanisms in the sector include both global budgeting and line-item methods
8.5
6.3
6.6
7.5
61.4
68.9
66.6
63.1
4.9
3.6
3.9
12.3
10.5
11.3
12.1
3.8
1999
2001
2002
2003Universities
Colleges
Primary, lower andupper secondaryacademic education
Local Budgets forpreschools
Share of Public Expenditures in Education by Academic Levels (%), 1993-2003
Pre-primary Education
Only 18% of children attends pre-primary education establishments
Private ownership emerged only in 2000
There are significant disparities between the Capital city and other regional units
0
5
10
15
20
25
30
35
Total 20.44 19.34 17.68 16.02 26.52
Capital 21.93 15.24 15.61 17.47 29.74
Other urban 33.33 25.98 17.65 16.67 6.37
Rural 19.25 25.29 19.83 18.97 16.67
1 2 3 4 5
Utilization rates in pre-primary education per population quintiles (%), 2003
Primary and Secondary Education
Primary and secondary education requires 65% of total education expenditures
State is a primary service provider
Allocation of resources is mostly based on global budgeting system
Utilization rates in primary and secondary education per population quintiles (%), 2003
0
5
10
15
20
25
30
Primary education 17.6 16.48 20.43 20.46 25.03
Capital 22.3 17.4 18.4 18.9 23.0
Other urban 26.5 28.4 26.5 28.4 26.5
Rural 15.9 17.9 20.6 21.1 24.5
1 2 3 4
College and Higher Education
Colleges and Universities have the highest private sector’s participation- 19 percent
These institutions provide also paid services and rely less on public resources
Utilization rates in colleges and higher education per population quintiles (%), 2003
19.15
17.02
21.28
19.15
23.4
12.5
18.27
24.04
21.15
24.04
1
2
3
4
5
higher education
Technicum
Health Government health expenditures have
sharply decreased
Armenia has the lowest utilization rates in healthcare among CIS countries
Reforms include transformation from
input based financing to output based system
Primary and secondary healthcare services have the highest share in total health expenditures
Basic Benefit Package consists of two types of free services
HospitalsPoliclinics andAmbulatories
199953.8 22.7
200054 17.9
200156.5 19.1
200255.3 23.2
200351.3 39.7
Shares of Primary and Secondary Healthcare in Total Health Expenditures (%), 1999-2003
Primary and Secondary Healthcare
Policlinics with the ambulatory systems serve as primary healthcare institutions
Prioritization of Primary healthcare
Allocation of public resources
based on catchment area population and capitation rates
Reorganization of Hospitals
Allocation of resources in Capital based on actual number of cases
Financing of services at the regional level has incremental nature depending on relative number of poor and vulnerable people
Primary Healthcare Secondary Healthcare
Utilization Rates in Healthcare
34.15
33.65
36.96
33.06
32.89
5.05
5.12
5.33
5.27
4.79
1
2
3
4
5
Consulted
Suffered from illness andinjury and consulted
Percentage of people suffered from illness and injury and consulted in each quintile (%),2003
Quintiles 1 2 3 4 5
Policlinics 15.6 19.2 19.2 20.5 25.4
DiagnosticCenter 12.5 18.7 21.9 25 21.9
Hospitals 17.5 15.5 21.5 20.5 25
PrivatePhysician 29.0 11.3 21.0 24.2 14.5
Other 11.8 23.5 35.3 20.6 8.82
Utilization rates in healthcare by different institutions and quintiles of the population (%), 2003
Poverty Family Benefits
Poverty Family Benefit System was introduced in 1999
Number of households receiving Poverty Family Benefits decreased from 230 thsnd. in 1999 to 150 thsnd. in 2002
Amount of budget allocations decreased from 8.5% to 5.4% in total
Q 1999 2001 2002 2003
1 19.4 17.7 16.5 25.1
2 19.3 16.3 18.5 26.2
3 20.5 19.5 19.2 27.1
4 19.7 22.2 20.4 21.6
5 21.1 24.2 25.4 0.0
Utilization rates of Family Poverty Benefits per population quintiles (%), 1999-2003
Gross Benefit Incidence Analysis Benefit incidence is computed based on
government expenditures in three sectors:
1. Education2. Health3. Poverty Family Benefits
Analysis focuses on direct expenditures comprising more than 70%
Benefit Incidences in Education, 1999-2003
0
0.2
0.4
0.6
0.8
1
1 0.67 0.36 0.55 0.76
2 0.78 0.7 0.87 0.72
3 0.65 0.5 0.53 0.65
4 0.78 0.74 0.95 0.59
5 0.57 0.86 0.89 0.98
1999 2001 2002 2003
Benefit Incidence in Pre-primary Education, 1999-2003
0
2
4
6
8
10
1 5.08 3.66 4.61 5.86
2 5.25 7.09 7.27 5.49
3 5.25 5.03 4.44 6.8
4 4.82 7.55 7.98 6.81
5 4.5 8.69 7.45 8.33
1999 2001 2002 2003
Benefit Incidence in Primary Education, 1999-2003
Benefit Incidences, 1999-2003
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
1 0.36 1.02 0.44 0.71
2 0.83 0.69 1.1 1.04
3 0.86 1.06 1.03 1.37
4 1.41 0.88 1.54 1.21
5 1.55 1.76 1.98 1.37
1999 2001 2002 2003
Benefit Incidence in Higher Education, 1999-2003
0
1
2
3
4
5
6
7
8
1 6.81 4.71 3.63 4.75
2 6.77 4.34 4.09 4.97
3 7.19 5.18 4.23 5.14
4 6.92 5.89 4.5 4.09
5 7.41 6.44 5.61 0
1999 2001 2002 2003
Benefit Incidence of Poverty Family Benefits, 1999-2003
Benefit Incidences in Health, 1999-2003
Policlinics Hospitals
1999 2001 2002 2003 1999 2001 2002 2003
1 0.34 0.29 0.28 0.50 0.61 0.55 0.80 0.94
2 0.35 0.26 0.46 0.58 0.70 1.16 1.25 1.67
3 0.37 0.27 0.33 0.85 0.72 1.35 0.85 1.00
4 0.30 0.34 0.32 0.62 1.13 1.53 1.20 1.60
5 0.49 0.20 0.42 0.69 1.39 1.96 1.93 1.93
Gross Benefit Incidence
0
5
10
15
20
1 13.88 10.59 10.31 13.63
2 14.68 14.24 15.04 14.57
3 15.06 13.39 11.4 15.81
4 15.35 16.94 16.49 14.8
5 15.91 19.91 18.27 13.19
1999 2001 2002 2003
Benefit Incidence for two poorest groups declines drastically in 2001 by 13 percent
For two highest quintiles Benefit Incidence increases by 17 percent
These indicators improve from 2001 to 2003
Conclusions Main social expenditures are almost evenly distributed
among population groups in 2003
In Education the richest groups gain higher benefits in all academic levels
Primary healthcare has more pro-poor effect than secondary healthcare
Significant improvement in distribution of Poverty Family Benefits