Responsible researcher: Pedro Jorge Holanda Alves
Article title : PUBLIC EXPENDITURE ON EDUCATION AND SCHOOL PERFORMANCE
Author of the article : Joana Monteiro
Intervention Location : Brazil
Sample Size : 1st Stage (4,115 observations) and 2nd Stage (220-240 observations)
Sector : Education
Type of Intervention : Effect of public spending on school performance
Variable of Main Interest : Enrollment rate and academic performance
Evaluation method: Experimental Evaluation (RCT)
Policy Problem
It is possible to verify that in Brazil, school insertion policies were positive in relation to the increase in the number of enrollments and student retention. According to Monteiro (2015), in 20 years, the average number of years of study of the Brazilian population increased by 55%, so that 93% of children between 6 and 14 years old are enrolled in primary education. However, according to the results of the Program for International Student Assessment (PISA), of the 65 countries that took the exam, Brazil ranked 58th, 55th and 59th in the rankings for the highest scores in mathematics, reading and science, respectively. .
Similar to what happens with public policies to encourage school enrollment, which have positive results, programs focused on student performance also generate benefits for students. To this end, public policy makers must adopt more measures aimed at improving the performance of enrolled students, and, in a way, generating more efficient results. For certain situations, it is necessary that greater expenditure be allocated to education and it is possible to apply these measures.
In Brazil, the budget division system defines that municipal mayors have autonomy to define their expenses, but the collection is the responsibility of the federal government, which collects a large part of the revenue and transfers proportional portions to states and municipalities. In some specific cases, it is possible to identify cases of municipalities with similar characteristics that receive federal resources in different volumes.
Assessment Context
Certain municipalities in the coastal region benefit from being located in prolific extraction of royalties and for this reason, these municipalities receive a certain amount of transfer from the federal government. Monteiro (2015) analyzes the impact of public spending on the educational quality of Brazilian oil-producing municipalities that benefited from an increase in royalty revenues. Educational quality can be positive in two ways: on the one hand, spending can generate an increase in enrollment and ensure that a greater number of children are enrolled in schools and, on the other hand, spending can increase student performance.
Due to the strong increase in revenue received from royalties in 1998, the analysis begins in this year (some variables were used in 2000 as it was the closest year with data) until 2010, which is the last year with information from the Demographic Census. The variables related to school enrollment are represented by the net attendance rate in primary education (ratio between the number of people aged 6 to 14 who are regularly enrolled in primary education and the total population in the same age range) and the percentage of children aged 6 to 14 who do not attend school. To measure the progress in education of the young generation, the author uses the illiteracy rate of individuals between 11 and 14 years old, the percentage of children aged 6 to 14 years old who are 2 or more years behind in school and the expected years of study. Finally, the analysis will seek evidence whether receipt of oil royalties is associated with these improvement results in the educational area, using data from Prova Brasil as an indicator of school performance.
Policy Details
Due to the increase in oil production, the Brazilian State decided to establish the Petroleum Law, in which municipalities would benefit from part of these extractions and that part of this transfer of oil royalties would not be exclusive to the producing municipality, but also to nearby regions. . The weight of these transfers became significant after 1997, with production growing more than double between 1997 and 2010, so that the transfer increased from R$424 million to R$21.6 billion in the period described. What is expected with these transfer increases is that this can generate slack in municipalities' revenues, and consequently, create space for more policies aimed at student performance to be adopted.
Methodology Details
For his estimates, Monteiro (2015) separates the evaluation process into two stages. Initially, using indicators of school quantity and quality in a simple regression, we investigated how the municipalities that invested the most in education between 2000 and 2010 behave. In the second stage, we verified the existence of a relationship between revenue gains municipal income from oil production in relation to increased spending on education. The affirmation of this relationship allows the use of a regression with instrumental variables to identify which additional gains due to oil activities have had an impact on investment in education and school results.
Based on geographic criteria, the Petroleum Law applies the distribution of royalties, with municipalities located on the coast having the right to receive more than neighboring municipalities outside the coast. This distinction allows the definition that municipalities on the Brazilian coast are “treated” because they receive a greater amount of transfers than their neighboring municipalities, which would be defined as “control”. The use of the law becomes favorable for causal analysis, since geographically they are similar municipalities, with the difference that there are different revenue gains in relation to oil royalties.
Although this strategy is not free from criticism, as the determination implies that whether or not to receive this resource is independent of municipal economic and political characteristics, only on a maritime border that has oil production. Therefore, municipal policy makers cannot define the level of royalty revenue each year and the difference between the two groups of municipalities would be defined by the increase in expenditure, caused by the increase in revenue transferred by the federal government.
However, as we are interested in seeing the effects reflected in the expenditure, even if 75% of the resources received are defined by law as being invested in education, the decision on how to apply it depends on the effort and objectives of the mayors, which can generate a certain bias in the estimates. For this reason, in this second part, a simple estimation was not made, but the value of oil production was used as an instrument to capture the local effect of expenditure on education.
Results
In the first stage, with around 4,000 municipalities, the results indicate that increases in spending on education increase the number of children in schools, using indicators of enrollment rate and children out of school. This result probably occurs due to the constitutional factor of the Basic Education Maintenance and Development Fund (FUNDEB) which links transfers from the federal government to municipalities based on the number of enrollments. In the second stage, on the other hand, estimates show that due to the increase in the budget due to royalties, municipalities increase 9% in the average salary of teachers, with the aim of increasing student performance, however, there is no sign that This policy has resulted in improvements in educational performance.
Although part of the resources gained from oil was allocated to education expenses, the evidence for 239 observations between 1998 and 2010 is that the sector was not highly prioritized, with only 14% of royalty revenues allocated to education and only one difference of 13% in spending by municipalities in the Brazilian coastal region compared to their neighbors. In monetary terms, the increase in the value of oil production is associated with an increase in royalty revenue of R$0.02, which, consequently, was converted into expenses by municipalities and generated an increase in education of R$0.003.
Public Policy Lessons
In some cases in Brazil and around the world, we are faced with situations in which local governments, for some external reason, receive a greater amount of financial resources and, therefore, have greater availability of investment and spending options. These cases serve as experiments to show how local governments with a large amount of revenue, or with unexpected revenue gains, behave when deciding to define the destination of their expenses.
This work contributes to the literature by showing how Brazilian municipalities behave in terms of educational quality when they have greater availability of resources. The results presented show that the lesson being learned indicates that just the use of resources to increase teachers' salaries does not present significant results for performance. It is necessary for municipalities to adopt other policies, such as better teacher qualifications, greater student monitoring or improvement of the school structure.
Reference:
MONTEIRO, Joana. Public spending on education and school performance. Brazilian Journal of Economics, v. 69, no. 4, p. 467-488, 2015.