6.13 Transfers and education spending

The association between transfers and spending is clearly strong. Regression estimates (World Bank 2021), which control for other possible influences on total spending as well as the possible endogeneity of some transfers, suggest that the elasticity of total per capita spending with respect to total transfers per capita is around 0.85, which is relatively large. Furthermore, the regression results indicate that the DAU has the greatest influence among all transfers on total spending. The estimated elasticity of total per capita spending with respect to per capita DAU transfers is about 0.45.

Figure 6.13 illustrates the relationship between districts’ per capita transfers and per capita education sector spending. Again, the relationships are strong, although perhaps not as robust as those for intergovernmental transfers and total district spending. Econometric analysis indicates that the elasticity of district per capita education spending with respect to total transfers per capita is about 0.45. As before, the DAU has the most significant influence on education spending. The elasticity of per capita education spending with respect to per capita DAU is approximately 0.50. See World Bank (2021) for the detailed regression results.

One curious finding from the regression results (World Bank 2021) is that the DAK have no statistically significant impact on district spending, either in total or for education. DAK is meant to stimulate capital spending, not spending in

FIGURE 6.13

Transfers and education spending

Source: World Bank calculations based on data from Ministry of Finance. Note: DAK = specific purpose grant; DAU = general purpose grant.