DISTRIBUTIONAL IMPACT OF PUBLIC EXPENDITURES IN ARMENIA

1
DISTRIBUTIONAL IMPACT OF PUBLIC EXPENDITURES IN
ARMENIA

• Shoghik Hovhannisyan
• Terry Sanford Institute of Public Policy Duke
  University

2
Policy Question

• To what extent are the Armenian governments
  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?

3
Benefit Incidence Analysis (BIA)

• BIA is a direct impact analysis of public
  expenditures
• BIA involves a three-step methodology
• Aggregating households into the quintiles of
  population
• Imputing subsidies to household quintiles
• Estimating gross benefit incidence including
  Health, Education and Poverty Family Benefits

4
Education
Share of Public Expenditures in Education by
Academic Levels (), 1993-2003

• 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

5
Pre-primary Education
Utilization rates in pre-primary education per
population quintiles (), 2003

• 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

6
Primary and Secondary Education
Utilization rates in primary and secondary
education per population quintiles (), 2003

• 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

7
College and Higher Education
Utilization rates in colleges and higher
education per population quintiles (), 2003

• Colleges and Universities have the highest
  private sectors participation- 19 percent
• These institutions provide also paid services and
  rely less on public resources

8
Health
Shares of Primary and Secondary Healthcare in
Total Health Expenditures (), 1999-2003

• 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

9
Primary and Secondary Healthcare
Primary Healthcare
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

10
Utilization Rates in Healthcare
Percentage of people suffered from illness and
injury and consulted in each quintile (),2003
Utilization rates in healthcare by different
institutions and quintiles of the population
(), 2003
11
Poverty Family Benefits
Utilization rates of Family Poverty Benefits per
population quintiles (), 1999-2003

• 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

12
Gross Benefit Incidence Analysis

• Benefit incidence is computed based on government
  expenditures in three sectors
• 1. Education
• 2. Health
• 3. Poverty Family Benefits
• Analysis focuses on direct expenditures
  comprising more than 70

13
Benefit Incidences in Education, 1999-2003
Benefit Incidence in Pre-primary Education,
1999-2003
Benefit Incidence in Primary Education, 1999-2003
14
Benefit Incidences, 1999-2003
Benefit Incidence of Poverty Family Benefits,
1999-2003
Benefit Incidence in Higher Education, 1999-2003
15
Benefit Incidences in Health, 1999-2003
16
Gross Benefit Incidence

• 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

17
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