Benefit incidence analysis of government expenditure on education

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Education is essential for the development of a country because it facilitates the harnessing of the potentials of the human resource. The social and economic returns of education include employment, learning to be better people, socialization into modern sector life, high level of literacy, moral responsibility and discipline, less sickness and diseases, less medical expenditure, high level of productivity in all sectors, all leading to high standard of living. While Government of Ghana is spending huge sums of money on education, there is a low participation rate of educational programmes among the very poor and the poor. The result is inequitable distribution of government subsidy among the various income groups. This dissertation measures the distributional impact of government subsidies on education on the three income groups, namely, “the very poor, the poor, and the non-poor using the Benefit Incidence Analysis. This analysis measures the household participation rate based on household survey data. The dissertation shows that household participation rate is high among the non-poor, low among the poor, and very low among the very poor across the pre-school, primary school, junior secondary school and senior secondary school programmes. Using the consumer surplus measure, the study shows the following :(i) The non-poor income group that constitutes a small percentage of the population in the study area captures a disproportionately large percentage share (i.e. 69.2%) of the subsidy on education because of their high participation rate.(ii) The very poor and the poor income groups that constitute a large proportion of the population capture a very low percentage(i.e. 30.8%) of the subsidy because of their low participation rate in educational programmes. A consumer’s surplus of at least 0277,489.16 is enjoyed by a participant in the pre-school programme, 0373,321 .69 for the participant in the primary school programme, 0575,121.77 for the JSS programme and 01,350,113.16 for the SSS programmt The study also tested the hypothesis that Household Participation Rate (HPR) in educational programmes with Government Subsidy on education (GSE) is significantly different from Household Participation Rate (HPR) in educational programmes without GSE at 5% level of significance. The analytical model used HPR ( as dependent variable) and regressed on the independent variables (Educational attainments in codes of years (E), Ages of household heads (A), Income levels of households (Y), Dependants on household heads (D), and GSE. This produced an adjusted R2 of 0.86 which exerts a significantly positive influence on the model. The independent variables were all together significant at 5% level while GSE was the most statistically significant variable in determining HPR in educational programme. The signs of all the independent variables met the a priori expectations. The results have possible implications for government to provide, in addition to the universal subsidies, selected subsidies to target the very poor and the poor. This provides more avenues for these income groups to increase their access and participation in educational programmes which would ensure the promotion of equity in the distribution of government subsidy. This would ensure a balanced and integrated development of the human resource of the entire Ghanaian economy.
A thesis presented to the Department of Economics and Industrial Management, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the award of Master of Arts degree in Economics, 2005