Mun C. Tsang Teachers College Columbia University

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Mun C. TsangTeachers College Columbia University

• Financial Disparities And Intergovernmental
  Grants In Compulsory Education In China

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Sources

• Tsang, M. Ding, Y. (Forthcoming 2005).
  Resource utilization and disparities in
  compulsory education in China. China Review
• Tsang, M. (2002). Financing compulsory education
  in China Establishing and strengthening a
  substantial and regularized system of
  intergovernmental grants. Harvard China Review,
  No. 5 15-20.

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Objectives of Presentation

• Document disparities in per-student spending in
  compulsory (primary and lower-secondary)
  education in the late 1990s
• Argue for the establishment of a regularized and
  substantial scheme of intergovernmental grants in
  compulsory education

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Financial Reform of Education The Historical
Context

• 1985 Reform
• Administrative and fiscal decentralization
• Diversification in resource mobilization
• Achievements
• Decentralized diversified system
• Increased resources to education sector
• Notable Problems
• Financial difficulties of poor and rural areas
• Substantial disparities in education spending

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Research Questions

• How were educational resources utilized in 1999?
• What was the extent of inequality in per-student
  spending in 1999?
• Was there any change in inequality in per-student
  spending between 1997 and 1999?

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DATA

• Financial database of the Ministry of Education
• About 2,900 observations in 1999 (county level
  units)
• About 2,600 observations in 1997-1999 analysis
• Comparison with previous studies (Jiang 1992
  Tsang 1994 Wang 1998 Zhang 1998 Pan 2000
  etc.)
• Focus on county level (increasing important of
  county units)
• Most comprehensive dataset
• More comprehensive analysis of disparities
  (across regions, urban/rural, minority/non-minorit
  y areas)
• Change in inequality in the late 1990s

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Summary Of Findings (1) Resource Utilization
Disparities In 1999

• 1. Similar pattern of resource utilization across
  areas and regions
• Primary education recurrent spending amounted to
  94 of total spending and personnel spending
  about three-quarters of recurrent spending
• Lower-secondary education recurrent spending
  amounted to 92 of total spending and personnel
  spending about two-thirds of recurrent spending

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Summary Of Findings (1) Resource Utilization
Disparities In 1999 - Continued

• 2. Large variations in per-student total spending
  across areas and regions
• Urban areas substantially more than rural areas
  84 in primary education 69 in lower-secondary
  education
• Region One (coastal) substantially more than
  Region Three (inland/west) 71 75 more
• Non-minority areas somewhat more than minority
  areas 6 24 more

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Summary Of Findings (1) Resource Utilization
Disparities In 1999 - Continued

• 3. Variation Related to How Schools Were Financed
• Importance of non-government sources
• Schools in less-advantaged areas depended more on
  government funding which was used mostly on
  personnel inputs
• Financial difficulty was a key contributing
  factor to poor education inputs in poor rural
  areas

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Summary Of Findings (1) Resource Utilization
Disparities In 1999 - Continued

• 4. Measure of Inequality in Per-student Total
  Spending
• The five measures (restricted range, federal
  range ratio, coefficient of variation, Gini
  coefficient, Theil index) consistently showed a
  large degree of inequality at both the primary
  and lower-secondary education levels across areas
  and regions
• Decomposition of Theil Index
• Primary education index 0.23 (71 due to
  variation within provinces, 29 across provinces)
• Lower-secondary education index 0.23 (69 due
  to variation within provinces, 31 across
  provinces)

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Summary Of Findings (2) Change In Inequality
Measures, 1997-1999 (Based On Per-student Total
Spending)

• Modest change but mixed findings
• Some modest increase, based on the restricted
  range, federal range ratio, and coefficient of
  variation
• No change, based on Gini coefficient
• Modest decrease, based on Theil Index
• Overall, little change in inequality between 1997
  and 1999, but with some increased polarization at
  both ends of spending
• Decomposition of Theil Index
• Inequality across provinces increased between
  1997 and 1999

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Role Of Intergovernmental Grants In Financing Of
Compulsory Education

• 1. Decentralization as a process in China
• Administrative decentralization
• Fiscal decentralization
• Devolution of decision-making power
• Capacity building
• Accountability
• Financial challenges (difficulties of poor areas
  disparities)

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Role Of Intergovernmental Grants In Financing Of
Compulsory Education Continued

• 2. Current weaknesses in financial equalization
• Amount small
• Ad-hoc practice (not regularized)
• Limited scope (project based, investment)

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Role Of Intergovernmental Grants In Financing Of
Compulsory Education Continued

• 3. Arguments for intergovernmental grant scheme
• Efficiency argument
• Equity argument
• Socio-political argument

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Role Of Intergovernmental Grants In Financing Of
Compulsory Education Continued

• 4. Need for intergovernmental grant scheme
• Regularized
• Substantial increase over time
• Broader scope (recurrent spending too)
• Stable growing revenue sources
• Evolving process of development

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Role Of Intergovernmental Grants In Financing Of
Compulsory Education Continued

• 5. Issues to be tackled over time
• Appropriate intergovernmental structure
• How to raise additional resources
• How to distribute intergovernmental grants
• Nature of decision-making process

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Table 1 Per-student spending by category, 1999
(Yuan)
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Table 7 Inequality in per-student school
spending Restricted range, federal range ratio,
and coefficient of variation, 1999
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Table 8 Inequality in per-student spending Gini
coefficient and Theil Index, 1999
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Table 9 Decomposition of Theil indexes, 1999
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Table 11 Changes in per-student total spending
between 1997 and 1999
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Thanks!

• Questions?