GOLDEN GROWTH
often used as a measure of the quality of health care, and is correlated with infant and under-five mortality rates. The net secondary enrollment rate provides a measure of the extent to which the population eligible to participate in secondary education is actually enrolled. Net rates are a more precise measure of participation than gross rates as they exclude over-age and under-age children. However, enrollment rates do not measure the quality of education and learning achievements. The analysis contrasts the impact of public spending on health and education outcomes as measured by these two indicators. This exercise is merely suggestive, as a proper consideration of health and education would require a more disaggregated look at inputs and outputs for a range of outcomes. Figure 7.13 shows the geographic variation of the performance measures. Maternal mortality ratios are far lower, and net secondary enrollment rates somewhat higher, in Western than Eastern Europe. As a measure of the quality of government, we use the commonly used International Country Risk Guide indicator averaged over the dimensions of corruption, law and order, and quality of bureaucracy. We interpret this indicator as a broad measure of government effectiveness. As we saw earlier, quality of government declines in Europe as we move north to south and west to east. How does the impact of public spending vary across the two outcome measures? (The regression results are summarized in table A7.8). For maternal mortality, a 1 percent increase in government spending leads to a 1 percent reduction in the maternal mortality ratio. By contrast, we find that the elasticity of public spending on education with net secondary enrollment rates is only 0.2, suggesting that spending on health is effective than on education. Similarly, analyzing 114 countries over 1980–2004, Hauner and Kyobe (2010) argue that the link from more public spending to better performance is more tenuous in health than in education. What might account for these differences between the two sectors? One interpretation is that public spending is more effective in promoting good health care than good education because of the different nature of the services. In particular, infrastructure and equipment play a bigger role in health than education. In addition, there is a fundamental difference between health and education in most countries: education is delivered by the public sector; health is purchased by the public sector even though it owns some of the institutions. For all its problems, health may have been far more effectively privatized than education as far as provision is concerned (except at tertiary level). Furthermore, the public sector seems better able than the private sector to control costs for health care and to give access to a broad spectrum of people without any major loss in the quality of services, when one contrasts the experience of the United States with that in other countries (box 7.7). A final interpretation would be not so much about why public health spending works, but why public education spending does not. One aspect is that private spending might be better able to substitute for public spending in education. Another aspect is that public education systems might suffer from inefficiencies. The next section illustrates these inefficiencies in three countries.
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