CHAPTER 15: The Effects of Taxation and Spending on Inequality and Poverty
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8. Early capture of the benefits of government spending implies that incremental spending by government is likely to be more progressive than average spending.
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True False
9. Which of the following is not a significant problem in benefit incidence analysis:
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A. Survey data on educational attendance are unreliable. B. The choice of income vs. expenditure per capita in measuring the distribution of the benefits. C. Divergences between average and marginal benefits. D. Private valuations of government-provided services may differ from the cost of provision.
10. Discussion question: Demery writes, “public expenditures can be effective in reducing poverty only when the policy setting is right.”
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A. What does this mean? B. Give two more examples (preferably from your own experience).
Annex A. Case Study: Health Spending in Ghana This case study reports the essential results of a study of the incidence of government spending on health in Ghana, and is largely drawn from Demery (2000) and CastroLeal et al. (2000). The first step in any benefit incidence study is to estimate the unit costs. Table 15.A1 shows some results based on a survey of hospitals and clinics in Ghana in 1992. Two points are worth noting: the unit subsidy for treating an inpatient is about 12 times that of an outpatient; and unit subsidies in the Accra area are three times as high as in regions outside the capital. Such disparities are not unusual, but clearly are needed for a credible benefit incidence analysis. Table 15A.2 breaks down the users of health services by expenditure per capita quintile. This “imputation” exercise is based on data from the Ghana Living Standards Survey, in which households reported on their use of medical facilities. Betteroff households are more likely to use public and private providers. By combining the unit cost data with usage data, one arrives at the incidence of benefits, as summarized in table 15A.3. Health spending in Ghana may be characterized as “progressive, but not well targeted.” It is progressive in the sense that the subsidies represent a higher proportion of the spending of poorer than of richer households; it is not well targeted in the sense that the rich receive substantially more in absolute subsidies than the poor (as shown in the final column of table 15A.3).
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