Essays on Benefit Incidence and Efficiency of Public Spending on Education in Kenya

Abstract

Between 2002103 and 2009110 fiscal years, the Kenya government spent an average 0/6.4 percent 0/ GDP and 26 percent 0/ total government outlays on education and training. Households cover such costs as boarding expenses, user charges and private schooling costs. However education outcomes are not only low but also vary across counties. About 8.6 percent and 68 percent of primary and secondary school age children, respectively, are not in school. Survival to tertiary education level is relatively low with only 2 percent 0/ the pupils enrolled at primary grade one surviving to first year university education. This calls for a detailed analysis 0/ levels 0/ benefit incidence; technical efficiency and external efficiency 0/ public education spending in the country. The thesis consists 0/ three interlinked essays that empirically investigate the nexus between education inputs; and participation, learning processes, outputs and outcomes. The first essay estimates the average and marginal benefit incidence 0/ public education spending and the associated/actors. The second essay focuses on technical efficiency of public education spending and its correlates using the Data Envelopment Analysis (DEA) double bootstrap procedure. The DEA two-step procedure is used to address the main criticism 0/ the standard DEA approach. As an example, the technical efficiency indices obtained from the standard DEA may suffer from serial correlation. The standard DEA approach takes no account 0/ the underlying data-generating procedures, while violating the basic model assumption 0/ independence within sample. DEA double bootstrap process combines the DEA model with bootstrapping techniques in estimating bias corseted efficiency scores. The analysis was undertaken at county level with a view to mapping inequalities in education benefit incidence and efficiency. The third essay focuses on external efficiency 0/ education and provides a link between education and training to the country's labour market outcomes. Using 200516 Kenya integrated budget household data: the thesis illustrates that education enrollment rates are biased with children from medium and high income groups more likely to enroll at all levels 0f education and hence benefit more from any expansion in public education spending in Kenya. The bias is more pronounced at post primary level where enrollment rates are higher among the medium and high income groups compared to the low income group. The level 0/ benefit incidence varies across counties. The results point to the importance of increasing benefit incidence by improving socio-economic welfare 0/ households while addressing the socio-economic factors that constrain the poor and some counties from benefiting from public education spending. Gender disparities and over-age enrolment in schools need to be addressed. Technical efficiency scores estimated using DEA bootstrap in f.ssay 2 c;re I. 24, 1.12 and 3.04, for primary, secondary and tertiary education levels, respectively. Total/actor productivity change was estimated at 0.95 depicting a decline between 200516 and 2009110. The decline could be attributed to a decrease in technical progress during the review period. The findings indicate that there is scope for improving efficiency in education resource utilization. Outputs can be increased by 24 percent, 12 percent and 204 percent for primary, secondary and tertiary education, respectively, without increasing inputs. The magnitude of resource saving is estimated at 17 percent, 10 percent and 52 percent for primary, secondary and tertiary education, respectively. The level of savings depicts potential level of cut back in input use to produce same output. Personnel emoluments as proportion of education expenditure have a negative and statistically significant effect on efficiency of education. Female literacy has a positive and statistically significant effect on education efficiency. The study demonstrates that rates of return to schooling increase with level of education and vary across employment sectors. However, external and within household externalities are higher than private or individual rates of return to schooling. The study has various implications for policy. First, it is necessary to deal with pre-labour market inequalities including disparities in access and benefit incidence of schooling across counties, gender and income groups. Second, there is need to improve efficiency in allocation and utilization of education expenditures. National and county governments will need to allocate resources more equitably while taking into account other socio-economic factors that constrain demand for schooling. Some of these factors include poverty and over-age enrollment. Further, an equitable resource allocation framework should be developed under which counties with lower education outcomes receive higher portion of shared revenue than the better performing regions. The government may consider linking education inputs and financing to outcomes such as learning achievements and appropriate skills development. A qualifications framework that provides a mechanism for measuring and linking educational attainment to the labour market should be developed. It is important to increase access to schooling in secondary and tertiary levels of education whilst addressing inequalities; in order for all Kenyans to benefit from the positive and substantial internal and external effects of schooling. This thesis has five contributions that relate to application of most current techniques in linking education inputs to learning processes, outputs, outcomes and education externalities. First, the study is one of the few studies to estimate technical efficiency of education , in Kenya. In doing so the study uses DEA double bootstrap procedure which is a superior technique 10 the standard DEA to estimate technical efficiency measures across all education levels and to determine correlates of technical efficiency of education. Confidence intervals for technical efficiency measures obtained from the DEA double bootstrap procedure enable statistical inference to be conducted. Second, the study applies the marginal benefit incidence technique using cross sectional data-,to determine potential beneficiaries of expansion of public education spending in the Country. The study provides analysis on disparities in education sector performance, technical efficiency and average benefit incidence at county le~l; 'and factors-affecting benefit incidence of I education. Third, the study estimates comprehensive return! to education including external benefits of schooling; within household social externalities; returns for technical education; and returns of education in the agriculture sector. Fourth, the study addresses important policy issues including inequalities, efficiency and benefit incidence of education. Addressing these policy issues is important for the country in terms of meeting the aspirations of Kenya Vision 2030 and the need to enhance decentralization in education management as stipulated in the 20 I0 Constitution. Fifth, the research contribute to existing academic work on efficiency in public expenditure management, externalities of education and benefit incidence analysis by providing additional empirical evidence at county sub-national level. Finally, findings from the three essays would inform policy on improving efficiency in public expenditure management and effective resource utilization within decentralized education system; and targeting of education spending on education inputs