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Moreon the Effectiveness of Public Spendingon Health Care and Education; A Covariance Structure Model

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  • International Monetary Fund

Abstract

Using data for a sample of developing and transition countries, this paper estimates the relationship between government spending on health care and education, and social indicators. Unlike previous studies, where social indicators are used as proxies for the unobservable health and education status of the population, this paper estimates a latent variable model. The findings suggest that public social spending is an important determinant of social indicators, particularly in the education sector. Overall, the latent variable approach was found to yield more adequate estimates of social production functions, with larger elasticities of social indicators with respect to income and spending on education than the traditional approach, providing stronger evidence that increases in public spending have a positive impact on social indicators. The study also finds that the millennium goal of universal primary education enrollment by 2015 could be achieved through an increase by one-third, on average, in education spending.

Suggested Citation

  • International Monetary Fund, 2002. "Moreon the Effectiveness of Public Spendingon Health Care and Education; A Covariance Structure Model," IMF Working Papers 02/90, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/90
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    References listed on IDEAS

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    9. Gupta, Sanjeev & Verhoeven, Marijn & Tiongson, Erwin R., 2002. "The effectiveness of government spending on education and health care in developing and transition economies," European Journal of Political Economy, Elsevier, vol. 18(4), pages 717-737, November.
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    11. Filmer, Deon & Hammer, Jeffrey S & Pritchett, Lant H, 2000. "Weak Links in the Chain: A Diagnosis of Health Policy in Poor Countries," World Bank Research Observer, World Bank Group, vol. 15(2), pages 199-224, August.
    12. Gupta, Sanjeev, 2000. "Social issues in IMF: supported programs," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34725, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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