Human and physical infrastructure : public investment and pricing policies in developing countries

Almost by definition, the basis for development is infrastructure - whether services for human infrastructure (health, education, nutrition) or physical infrastructure (transport, energy, water). Although the infrastructure sectors are diverse, what they have in common is that public policy has had a great deal to do with how these services are provided and financed in almost all countries. The author reviews the recent literature on two key aspects of that involvement: investment and pricing. While the quality of the econometric evidence varies, recent literature reinforces the view that human and physical infrastructure are critical for economic growth and the reduction of poverty. And the state is recognized as playing a key role in ensuring the efficient, equitable allocation of resources for infrastructure. Despite many sound theoretical reasons for such public involvement, however, recent studies have shown that it leaves much to be desired in efficiency and equity. One symptom is underinvestment in key subsectors that have high economic returns and that help the poor the most, such as primary education and rural health clinics, in relation to more expensive interventions, such as tertiary education and urban hospitals. Another common malaise is the poor use of scarce resources, leading to low quality (students learning little) and reliability (irregular power and water flows), poor maintenance (dilapilated roads), and inappropriate input use (too many school adminstrators or health workers and not enough books or drugs in producing education health outcomes). Just as market failures necessitate government intervention in the infrastructure sectors, so government failures should be considered in deciding the depth and extent of that intervention. The literature has made some advances in diagnosing these problems in poor countries and proposing solutions. But information gaps remain, particularly in developing robust methodologies for: 1) making intersectoral comparisons across the wide range of infrastructure services; 2) crafting more diverse policies about the public-private balance in infrastructure investment, depending on the nature of"public goods"characteristics for various types of infrastructure services, or even across activities for the same service (for example, power transmission versus distribution); and 3) taking issues of political economy into account, such as the vested interests of those with large financial interests in infrastructure. The author also highlights public pricing as a policy initiative that has recently gotten much attention.After briefly reviewing the basic concepts of pricing, he focuses on the literature about pricing reform. Most commonly, the public sector is the main provider of infrastructure services, usually free or at subsidized prices. But the recent literature has aired a rethinking of the balance between public and private financing of infrastructure. The debate in this area is often heated. Health and education are traditionally provided free and some recent literature argues for positive prices, at least for higher tiers of service. The principle of public pricing has been more widely accepted in transport, energy, and to a lesser extent water, but often the levels are too low and do not provide the appropriate incentives for efficient and equitable use.Environmental Economics&Policies,Banks&Banking Reform,Health Monitoring&Evaluation,Public Sector Economics&Finance,Economic Theory&Research

Private transfers and public policy in developing countries : a case study for Peru

Private interhousehold cash transfers are an important source of income in many developing countries. Although precise transfer patterns are only beginning to be researched, the authors review the preliminary evidence from other studies and conduct original analysis based on the recent Peru Living Standards Survey. The paper reveals that private transfers are being directed toward vulnerable groups in society. The poor, the elderly, the very young, the disabled, the unemployed, and female headed households all receive disproportionately more transfers than their share in the population. In Peru, the lowest income quintile's share in total income is increased by 14 percent as a result of private transfers. In contrast, public transfers ( mostly social security payments ) increase that quintile's income share by only 4 percent. The authors conclude by revealing that these findings are not consistent with a purely altruistic model of giving, which predicts a one to one substitution for public giving. They are consistent with theories of exchange and private insurance.Safety Nets and Transfers,Services&Transfers to Poor,Rural Poverty Reduction,Poverty Assessment,Banks&Banking Reform

The public role in private post-secondary education : a review of issues and options

This paper considers whether private educational institutions can play an expanded role in helping attain society's objective with respect to the efficiency and equity of the system of post-secondary education. The authors focus on how public subsidies can be used to meet the social objectives of private education. In recent years there hasbeen increasing evidence of a growing problem of graduate unemployment. Higher education has also been perceived as a socially unproductive but privately profitable screening device. The paper argues that public subsidies should be targeted toward disciplines that have high social returns. If subsidies are to be used to make private higher education more accessible to the poor, a strong case can be made for scholarships and/or loan guarantees. The paper also discusses ways to promote quality among private institutions. The most efficient way to make schools better is to design an incentive system that rewards institutions on the basis of how their graduates perform -- although this might favor students from high-income families. In addition, inappropriate labor market legislation and government behavior as an employer may have contributed to problems of graduate unemployment, credentialism, and a swollen bureaucracy in some countries.Teaching and Learning,Gender and Education,Health Monitoring&Evaluation,Curriculum&Instruction,Environmental Economics&Policies

Choosing policy instruments for pollution control : a review

This paper presents the design of cost effective interventions to protect the environment from excessive pollution in developing countries. The concept of intervention is motivated by the typical explanation for environmental problems in economic theory--external effects. The aim of the paper is to review the relevant theoretical and empirical economic literature in order: (a) to distill the principal lessons and evaluate general rules of thumb; and (b) to identify gaps that need to be filled in order to make them more accessible and relevant to developing countries. The paper defines broadly the range of policy instruments that can be used to address pollution problems in developing countries. It includes instruments that have traditionally been in the realm of public finance, such as taxes, prices and subsidies. But it also covers regulations and other instruments designed to affect the amount of pollution or to mitigate its damage. To limit the scope of this paper, the authors treat pollution control policies, but not policies to address other environmental problems, such as soil erosion, deforestation, desertification or other natural resource problems. Many of the principles presented, however, broadly relate to the problem of correcting for external effects, and can be applied to these other problems as well. It also focuses on domestic problems and does not deal explicitly with trans-national or global pollution externalities.Economic Theory&Research,Water and Industry,Health Monitoring&Evaluation,Pollution Management&Control,Environmental Economics&Policies

The relative effectiveness of single-sex and coeducational schools in Thailand

This paper provides evidence regarding the relative effects of single-sex and coeducational school in enhancing eighth grade mathematics achievement in Thailand. It uses pre and post eighth grade test scores to estimate value added equations for single-sex and coeducational schools. The preliminary conclusions are the following. First, girls in single-sex schools do significantly better than their coeducational school counterparts, while boys in coeducational schools do better. Thus there is not a unique single-sex/coeducational school effect on enhancing achievement, but this effect interacts strongly according to the sex of the student. Second, it is expected that selection biases are mitigated in"value added"formulations of achievement functions (as opposed to"level"formulations), and they are still significant in Thailand. Third, even after measured inputs and school practices are held constant, a single sex school advantage for females and a coeducational school advantage for males persist. Finally, peer"quality"effects in single-sex and coeducational schools appear to account for most of the difference between the two types of schools and their relative effectiveness for male and female students.Gender and Education,Teaching and Learning,Adolescent Health,Health Monitoring&Evaluation,Primary Education

The relative efficiency of public schools in developing countries

With the demand for schooling expected to increase and the tightening of fiscal constraints, changes will be necessary in order to meet ambitious educational targets. Instead of charging fees for public schools, a more cost-effective option is to rely on private schools to handle the growing demand for education. Private school students generally out perform public school students on standardized math and language tests. This finding takes into account that private school students usually come from slightly more advantaged backgrounds than their public school counterparts. In addition, school expenditure data show that unit costs for private schools are dramatically lower than those of public schools. The comparative advantage of private schools has important policy implications for public schools. Some efficiency gains can come from replicating the input mix of private schools. Also effective would be to mimic the organizational incentive structures of private schools.Teaching and Learning,Health Monitoring&Evaluation,Gender and Education,Primary Education,Education Reform and Management

Social Protection of Older People

Social protection is a major arena of government activity aimed at ensuring that vulnerable population groups receive appropriate and effective public support to ensure their financial security and to safeguard their health. However, despite the growth and extent of social protection programs in both developed and developing countries, most emerging economies have nascent systems and only a small portion of all such efforts address the specific vulnerabilities and needs of older people. This paper (a) discusses the vulnerabilities of older people and the benefits of crafting social programs to address them; (b) describes the nature of social protection and the forms it can take to address those vulnerabilities; (c) reports descriptive evidence on the availability and use of social protection programs; and (d) delineates steps that can be taken to remedy the shortfalls experienced by older people.aging, social protection