Policy implications of the distribution of public subsidies on health and education: The case of Karnataka, India

Comparative Education Review

Volumn 49, Issue 4, 2005, Pages 552-574

  Mahal, Ajay ^a  

^a HARVARD SCHOOL OF PUBLIC HEALTH   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 27744527292     PISSN: 00104086     EISSN: None     Source Type: Journal    
DOI: 10.1086/454376     Document Type: Review

References (44)

1. Articles 41 and 46 of the Constitution of India (New Delhi: Government of India, Ministry of Law, Justice and Company Affairs, 2000), 17.
2. Raghav Gaiha, "Is There a Case for the Employment Guarantee Scheme in India? Some Recent Evidence," Working Paper no. 2004-09 (Australia South Asia Research Center, Australian National University, Canberra, 2004).
3. See also S. Gupta, Preferential Treatment in Public Employment and Equality of Opportunity (Lucknow: Eastern Book Company, 1979).
4. The Constitution of India, 138.
5. Lok Sabha, National Health Policy (New Delhi: Government of India Press, 1985), 3.
6. Lok Sabha, National Health Policy, 41.
7. Constitution of India, 17.
8. Ministry of Finance, Government of India, Economic Survey 2004-5 (New Delhi: Ministry of Finance, 2004). By contrast, Kerala, among the more frequently studied Indian states, is an outlier, when compared to the rest of India. Its adult literacy rate exceeds 90 percent, its life expectancy similar to those in middle-income countries, and it has a per capita domestic product that is not only higher than that of Karnataka but also is supplemented heavily by remittances from the gulf, far more than any other Indian state.
9. Personal communication with Dipak Roychoudhury (Deputy Registrar General of India), August 2004.
10. Angus Deaton and Jean Dreze, "Poverty and Inequality in India: A Reexamination," Economic and Political Weekly, September 7, 2002, 3729-48.
11. Angus Deaton and Jean Dreze, Economic and Political Weekly, 3736.
12. T. Selden, and M. Wasylenko, "Benefit Incidence Analysis in Developing Countries," Working Paper Series no. 1015 (Country Economics Department, World Bank, Washington, DC, 1992).
13. Peter Lanjouw and Martin Ravallion, "Benefit Incidence, Public Spending Reforms and the Timing of Program Capture," World Bank Economic Review 13, no. 2 (1999): 257-73.
14. World Bank, Karnataka: Financing Education in the Context of Economic Restructuring, Report no. 24207-IN (Washington, DC: World Bank, Human Development Sector Unit, South Asia Region, 2002).
15. See also World Bank, India: New Directions in Health Sector Development at the State Level; An Operational Perspective, Report no. 15753-IN (Washington, DC: World Bank, Population and Human Resources Division, South Asia Country Department II, 1997).
16. "Average" benefit incidence analyses of programs describe how overall benefits from these programs are distributed among different socioeconomic groups. By contrast, marginal benefit incidence analyses answer the following question: How are any additional benefits from program expansion likely to be allocated among various socioeconomic groups? A method to test whether the two are different can be found in Lanjouw and Ravallion, "Benefit Incidence, Public Spending Reforms and the Timing of Program Capture."
17. Florencia Castro-Leal, Julia Dayton, L. Demery, and Kalpana Mehra, "Public Social Spending in Africa: Do the Poor Benefit?" World Bank Research Observer 14, no. 1 (1999): 49-72. Note that deducting user fees may not be appropriate if the fees are retained by the charging institution to enhance quality of services provided. However, this was not the case at Karnataka public health facilities in 1995-96.
18. For instance, a small subsidy for immunization may imply much greater gains in health than a large subsidy for primarily curative inpatient care.
19. Tax revenues constitute about 80 percent of general revenues of the government. See Government of India, Economic Survey 2004-5.
20. National Sample Survey Organization, Morbidity and Treatment of Ailments, Report no. 441 (New Delhi: Government of India, Department of Statistics, 1998), and
21. Attending an Educational Institution in India: Its Level, Nature, and Cost, Report no. 439 (New Delhi: Government of India, Department of Statistics, 1998).
22. Additional details can be found in Ajay Mahal and Indicus Analytics, "Achievements, Private Expenditures and Beneficiaries of Public Subsidies on Education: The Case of Karnataka" (unpublished paper, Indicus Analytics, New Delhi, April 2001).
23. Communication with Sajitha Bashir, World Bank, New Delhi Office, February 2001.
24. Measuring enrollment can also be controversial because there are typically two sources of enrollment data-survey-based statistics and official statistics. The standard procedure in the literature on benefit incidence analysis has been to use survey-based enrollment estimates, given that official enrollment records are often inaccurate. In the case of Karnataka, the official and survey enrollment statistics were not too far apart.
25. Ajay Mahal, Janmejaya Singh, Farzana Afridi, Vikram Lamba, V. Selvaraju, and Anil Gumber, Who Benefits from Public Sector Health Spending in India? (New Delhi: National Council for Applied Economic Research, 2002).
26. The estimates of unit costs of services may not fully account for quality. If quality of care at public facilities accessed by the richer groups is superior to that accessed by the poor for comparable services, the inequality in the distribution of public subsidies may be greater.
27. Even though care at Employee State Insurance Scheme (ESIS) facilities is "free" to its members, the bulk of expenditures on it, about 87.5 percent, is financed from members' premium contributions. Only 12.5 percent is financed by the state government, and this was the estimate used in the calculations reported for this article. The ESIS facilities are specifically identified in the household survey.
28. Because the point estimates of subsidies and shares reported in tables 5 and 6 are based on a sample survey, they ought, properly speaking, to be supplemented by associated standard errors. Adding standard errors to the tables would further clutter the already-busy tables. Given the sample sizes involved, and the large differences between them in most of the comparisons discussed in this article, however, the likelihood of any of the major conclusions being affected by this omission is small. Interested readers may contact the author for information on standard errors.
29. I am grateful to a reviewer for this point.
30. Detailed tables can be found in Mahal and Indicus Analytics, "Achievements, Private Expenditures and Beneficiaries of Public Subsidies on Education"; and Mahal et al., Who Benefits from Public Sector Health Spending in India?
31. P. Duraisamy, "Health Status and Curative Health Care in Rural India," Working paper no. 78 (National Council for Applied Economic Research, New Delhi, 2000); Indicus Analytics,
32. Ajay Mahal, and Pradeep Srivastava, "Determinants of School Enrollment, Attainment and Choice in Karnataka" (unpublished paper, World Bank, New Delhi, 2001).
33. See also Anil Deolalikar, Attaining the Millenium Development Goals in India: Role of Public Policy and Service Delivery (Washington, DC: World Bank, forthcoming).
34. T. Besley and S. Coate, "Public Provision of Private Goods and the Redistribution of Income," American Economic Review 81 (September 1991): 979-84.
35. Mahal and Indicus Analytics, "Achievements, Private Expenditures and Beneficiaries of Public Subsidies on Education."
36. Achievements, Private Expenditures and Beneficiaries of Public Subsidies on Education
37. Deolalikar, Attaining the Millenium Development Goals in India.
38. Lanjouw and Ravallion, "Benefit Incidence, Public Spending Reforms and the Timing of Program Capture."
39. World Bank, Karnataka: Financing Education in the Context of Economic Restructuring, 6.
40. In the Lanjouw and Ravallion paper, individuals were identified as belonging to different economic rankings depending on their position in the overall distribution of income in India ("Benefit Incidence, Public Spending Reforms and the Timing of Program Capture," 260). In this article, I take the position that the ranking relevant for purposes of allocation of benefits of public programs ought to be based on individuals' position in the income distribution of the province in which they reside rather than on the country's income distribution as a whole. In addition, the statistical analysis of this article differs from that of Lanjouw and Ravallion in that I also allow for alternative explanations for the way benefits from public programs are allocated: rising per capita incomes may lead richer groups to opt for private service providers, and higher levels of urbanization may increase poor people's access to public services, quite independently of their position on the income scale.
41. Lanjouw and Ravallion, "Benefit Incidence, Public Spending Reforms and the Timing of Program Capture," 14.
42. Lanjouw and Ravallion, "Benefit Incidence, Public Spending Reforms and the Timing of Program Capture," 271.
43. World Bank, Karnataka: Financing Education in the Context of Economic Restructuring, 35.
44. A. Indira and Vinod Vyasulu, "The Health Budget in Karnataka: A Preliminary Study" (unpublished paper, Center for Budget and Policy Studies, Bangalore, 2001).