What are the impacts of basic education financing funds on educational outcomes and child labor?

Responsible researcher: Viviane Pires Ribeiro

Article title: EFFECTS OF FUNDEF/B ON SCHOOL ATTENDANCE, SCHOOL FLOW AND CHILD WORK: AN ANALYSIS BASED ON THE 2000 AND 2010 CENSES

Article authors: Gabriela Cruz and Rudi Rocha

Location of intervention: Brazil

Sample size: 2,995,211 individuals

Big theme: Education

Type of Intervention: Impacts of FUNDEF/B on Brazilian basic education

Variable of Main Interest: Educational outcomes and child labor

Evaluation method: Experimental Evaluation (RCT)

Context of the Assessment

The 1988 Constitution of the Federative Republic of Brazil established that 18% of the Union's revenues and 25% of the revenues of states and municipalities, arising from taxes and transfers, should be allocated to education. However, according to Cruz and Rocha (2018), resources tended to be poorly applied or even directed to other areas due to the lack of linkage of these revenues for specific purposes and little supervision. In view of this situation, the Federal Government introduced the Fund for Maintenance and Development of Elementary Education and Valorization of Teaching (FUNDEF) in 1998, with the aim of promoting greater equity in educational spending in Elementary Education, thus changing the distribution of resources between states and municipalities.

Subsequently, in 2006, FUNDEF was replaced by the Fund for the Maintenance and Development of Basic Education and Valorization of Education Professionals (FUNDEB), now including all Basic Education – daycare and pre-school, Elementary Education, Secondary Education and Education of Young People and Adults (EJA). As a result, the proportion of taxes and transfers allocated to the fund was increased, and new sources of revenue and new minimum floors for per capita educational spending were incorporated. In this sense, Cruz and Rocha (2018) state that the introduction of FUNDEF/FUNDEB induced the expansion of educational spending in poorer municipalities, and can be considered one of the most important changes in the financing regime for Brazilian basic education.

Intervention Details

Cruz and Rocha (2018) evaluate the impacts of FUNDEF and FUNDEB on school attendance, age-grade distortion and child labor of children exposed to these resources during school age. The research was conducted with two main data sources: FINBRA (Finanças do Brasil/STN), which has self-declared information regarding the annual revenues and expenses of Brazilian municipalities, from 1993 to 2010; and the Demographic Censuses of the years 2000 and 2010. The total sample used in the study is composed of 2,995,211 individuals, which represent a population of children aged 7 to 14 of 27,788,831, considering the years 2000 and 2010 together .  

Initially, the authors built a database of municipalities over the years, in order to document the relationship between the implementation of FUNDEF/FUNDEB and the educational expenses of municipal governments. To this end, variables relating to expenditure on education and net transfers from FUNDEF/FUNDEB were constructed. They then built another database by crossing information about children aged 7 to 14 with the finances of the municipalities where they lived during school age, in order to evaluate the impacts of spending on education on individuals' results. As the microdata from the 2000 and 2010 Demographic Censuses have information on the outcome variables - school attendance, age-grade distortion and child labor - and control variables, the authors constructed the variable "FUNDEF/FUNDEB average net per capita" for each individual , based on data on municipal finances.

Methodology Details

Cruz and Rocha (2018) estimate regressions with fixed effects of municipalities and cohorts based on microdata from the 2000 and 2010 Censuses, and on FINBRA municipal expenditures from 1993 to 2010. The authors explore the variation in the exposure of different individuals to resources in education from FUNDEF and FUNDEB, which occurs between municipalities and birth cohorts. The identification hypothesis is that, conditional on the fixed effects of municipality, age, Census year, and controls, the remaining variation in the variable of interest is orthogonal to any and all variation in latent determinants of the outcome variables. Thus, models with balanced samples (according to municipalities over time) and unbalanced samples are estimated; and with a sample considering only children whose household status is child versus the total sample of children.

Results

The results found by Cruz and Rocha (2018) reveal positive effects of the increase in resources transferred via FUNDEF/FUNDEB. Considering municipalities whose proportion of enrollment in the municipal network is equal to the median (27% in 1995), an increase in net transfers from FUNDEF/FUNDEB of R$100 per capita is related to an increase in the probability of a child attending school by 0.05 percentage points, while the average age-grade distortion falls by 0.02 years. These results are equivalent to an impact of, respectively, 0.9% and 6.5% of a standard deviation compared to an increase in net transfers of one standard deviation (approximately R$385). The effect on the child's probability of working is close to zero. However, in municipalities where all enrollments belong to the municipal network, the effects are much more significant. An increase of R$100 in net transfers from FUNDEF/FUNDEB implies an increase of 0.3 percentage points in the probability of attending school, and a reduction in the age-grade distortion of 0.09 years.

In relation to the different impacts depending on the educational level of the head of the household, the results reveal that the positive effects tend to be stronger for those with a poorer family background. For them, the increase in the net FUNDEF/FUNDEB per capita of R$ 100 causes an increase in school attendance of 0.07 percentage points and a reduction in the gap of 0.03 years, considering the average municipal enrollment proportion. That is, in addition to the total positive effects on frequency and flow indicators, FUNDEF/FUNDEB also had important impacts on reducing inequalities in indicators among children.

Public Policy Lessons

What are the impacts of basic education financing funds on educational outcomes and child labor? The results found by Cruz and Rocha (2018) pointed to positive impacts of the increase in resources transferred via FUNDEF/FUNDEB on school attendance and the age-grade gap. These effects are greater in municipalities where the proportion of enrollments in the municipal network was initially higher. On the other hand, impacts on child labor are, in general, close to zero.

Regarding the different impacts depending on the level of education of the person responsible for the household, the results found by the authors show that it is children with lower socioeconomic status (households without primary education) who benefit most from the increase in resources allocated to education. Thus, it is likely that in addition to the positive impact on frequency and flow indicators in general, the redistribution of resources via FUNDEF/FUNDEB also has an effect of equalizing children's results, which means equalizing at least part of the opportunities that are offered to them. In this sense, Cruz and Rocha (2018) argue that this is an important aspect in terms of formulating public policies, considering that the transfer of resources via FUNDEF/FUNDEB mainly benefits children from families with lower socioeconomic status, who are the most vulnerable and have the worst educational results.

References

CRUZ, Gabriela; ROCHA, Rudi. Effects of FUNDEF/B on school attendance, school flow and child labor: an analysis based on the 2000 and 2010 Censuses. Estudos Econômicos (São Paulo), v. 48, n. 1, p. 39-75, 2018.