This article examines the incidence of public subsidies to health and education services in Ecuador. In Ecuador, health and education services are the only public expenditures that consciously attempt to redistribute welfare to the poor. The methods combine demand estimates from the willingness-to-pay literature with welfare dominance tests, allowing a comparison of the standard benefit incidence analysis with the more sophisticated demand estimates. The results give a clear progressivity ordering for the public services examined: primary school subsidies are the most progressive, followed by health consultations for children, health consultations for adults and secondary education (which are statistically indistinguishable), and subsidies for tertiary education. Of these, only the first two have a significant impact on the distribution of per capita expenditure, inclusive of benefits. These results are remarkably consistent across the methods used.
Get full access to this article
View all access options for this article.
References
1.
Akin, J., C. Griffin, D. Guilkey, and B. Popkin. 1985. The demand for primary health services in the third world. Totowa, NJ: Rowman and Allanheld.
2.
Beach, Charles, and Russell Davidson. 1983. Distribution-free statistical inference with Lorenz curves and income shares. Review of Economic Studies50:723-735.
3.
Browning, M.1992. Children and household economic behavior. Journal of Economic Literature50:1434-1475.
4.
Davidson, Russell, and Jean-Yves Duclos. 1997. Statistical inference for the measurement of the incidence of taxes and transfers. Econometrica65:1453-1466.
5.
Demery, Lionel. 1997. Benefit incidence analysis. Poverty Anchor, Poverty Reduction and Economic Management Network, The World Bank, January. Mimeo.
6.
Dor, Avi, and Jacques van der Gaag. 1993. Quantity rationing and the demand of adults for medical care in rural Cote d’Ivoire. In Health economics research in developing countries, edited by A. Mills and K. Lee, 193-213. New York: Oxford University Press.
7.
Dow, William. 1995. Unconditional demand for curative health inputs: Does selection on health status matter in the long run? Center discussion paper no. 740, Economic Growth Center, Yale University.
8.
Fierro-Renoy, Virginia. 1996. Ecuador: Análisis económico y funcional del gasto de las administraciones públicas. Unpublished draft.
9.
Gertler, Paul, and Paul Glewwe. 1990. The willingness to pay for education in developing countries: Evidence from rural Peru. Journal of Public Economics42:251-275.
10.
Gertler, Paul, Luís Locay, and Warren Sanderson. 1987. Are user fees regressive? The welfare implications of health care financing proposals in Peru. Journal of Econometrics33:67-88.
11.
Gertler, Paul, and Jacques van der Gaag. 1990. The willingness to pay for medical care: Evidence from two developing countries. Baltimore, MD: Johns Hopkins University Press.
12.
Government finance statistics yearbook. 1992. Washington, DC: International Monetary Fund.
13.
Grosh, Margaret E., and Paul Glewwe. 1995. A guide to living standards measurement study surveys. Living Standards Measurement Study working paper no. 120, The World Bank, Washington, DC.
14.
Howes, Stephen. 1996a. The influence of aggregation on the ordering of distributions. Economica63:253-272.
15.
Howes, Stephen. 1996b. A new test for inferring dominance from sample data. Unpublished draft.
16.
Hungerford, Thomas, and Gary Solon. 1987. Sheepskin effects in the returns to education. Review of Economics and Statistics69:175-177.
17.
Larrea, Carlos. 1992. The mirage of development: Oil, employment and poverty in Ecuador: 1972-1990. Ph.D. thesis, Social and Political Thought, York University.
18.
Lavy, Victor, and Jean-Marc Germain. 1994. Quality and cost in health care choice in developing countries. Living Standards Measurement Study working paper no. 105, The World Bank, Washington, DC.
19.
Litvack, Jennie, and Claude Bodart. 1993. User fees plus quality equals improved access to health care: Results of a field experiment in Cameroon. Social Science and Medicine!37:369-383.
20.
McFadden, Daniel. 1978. Modelling the choice of residential location. In Spatial interaction theory and residential location, edited by A. Karlquist, L. Lundqvist, F. Snickars, and J. Weibull, 75-96. Amsterdam: North-Holland.
21.
Meerman, Jacob. 1979. Public expenditure in Malaysia: Who benefits and why. New York: Oxford University Press.
22.
Ravallion, Martin, and Benu Bidani. 1994. How robust is a poverty profile?The World Bank Economic Review8 (1): 75-102.
23.
Sahn, David E., Stephen D. Younger, and Kenneth R. Simler. 1997. Dominance testing of transfers in Romania. Unpublished draft, Cornell Food and Nutrition Policy Program.
24.
Selden, T., and M. Wasylenko. 1992. Benefit incidence analysis in developing countries. Policy research working paper WPS 1015, The World Bank, Washington, DC.
25.
Selowsky, Marcelo. 1979. Who benefits from government expenditure? A case study of Colombia. New York: Oxford University Press.
26.
van de Walle, Dominique. 1998. Assessing the welfare impacts of public spending. World Development26:365-379.
27.
van de Walle, Dominique, and Kimberly Nead. 1995. Public spending and the poor: Theory and evidence. Baltimore, MD: Johns Hopkins University Press.
28.
Yitzhaki, Shlomo, and Joel Slemrod. 1991. Welfare dominance: An application to commodity taxation. American Economic Review81:480-496.
29.
Younger, Stephen D., Mauricio Villafuerte, and Lily Jara. 1997. Incidencia distributiva del gasto público y funciones de demanda en el Ecuador: Educación, salud, y crédito agrícola del BNF. Quito: FLACSO.
