Overcoming Market and Government Failures in India and

Overcoming Market and Government Failures in India and Africa Shanta Devarajan World Bank http: //africacan. worldbank. org 1

GDP growth in South Asia has been strong and accelerating 2 Source: World Development Indicators

Rapid growth is reducing poverty, but inequality is increasing 3 Source: Narayan, Ambar, et. al. 2006. “The challenge of promoting equality and inclusion in South Asian countries. ” mimeo, World Bank: Washington DC.

Big gaps between enrolment and completion in primary education 4 Source: Schweitzer, Julian. 2006. “Human development in South Asia. ” mimeo, World Bank: Washington, DC.

Immunization rates are low and stagnant Source: WDI Indicators Database 5

For the first time in 20 years, Africa’s growth is high and accelerating 6

Africa’s progress on poverty and social outcomes is uneven 7

I. Water in India 8

24 x 7 water: A pipe dream? per capita lpd vs. hours of supply/day Goa 341 Chandigarh 332 Mumbai 240 Delhi 223 Patna 222 Ludhiana 220 Jodhpur 190 Dasuya 184 Dera Bassi 173 150 Paris 149 Jaipur 145 Ahmedabad 133 Bikaner 123 Bangalore Gurdaspur 108 106 Bathinda Bharatpur 105 Udaipur 80 32 Chennai Source: Data collected from the water boards or utilities 8 10 5 4 10 10 2. 5 10 8 24 3 2 1. 5 2. 5 10 8 1. 5 2. 5 1. 5 9

Service to the Poor is big business 10

Politics, patronage, & network services 11

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II. Transport in Africa • Transport corridors From Teravaninthorn and Raballand, Transport Prices and Costs in Africa: A Review of the Main International Corridors, Directions in Development Series, World Bank, 2008. 13

SELECTED CORRIDORS OF THE STUDY 14

Transport costs are not excessively high in Africa comparing to France for example Central Africa East Africa West Africa Southern Africa France Variable costs (USD per veh-km) 1. 31 0. 98 1. 67 1. 54 0. 72 Fixed costs (USD per veh-km) 0. 57 0. 35 0. 62 0. 34 0. 87 Total transport costs (USD per veh-km) 1. 88 1. 33 2. 29 1. 88 1. 59 However, average transport prices in Africa are high in a global comparison 15

Corridor Gateway - Destination Price (USD/ veh-km) Variable cost (USD/veh- km) Fixed cost (USD/veh- km) Average yearly mileage (‘ 000) Profit margin (%) Tema/Accra - Ouagadougou 3. 53 1. 54 0. 66 30 -40 80% Tema/Accra - Bamako 3. 93 1. 67 0. 62 40 -50 80% Douala - N’Djaména 3. 19 1. 31 0. 57 60 -70 73% Douala - Bangui 3. 78 1. 21 1. 08 50 -60 83% Ngaoundéré - N’Djaména 5. 37 1. 83 0. 73 20 -30 118% Ngaoundéré - Moundou 9. 71 2. 49 1. 55 10 -20 163% East Africa Mombasa - Kampala 2. 22 0. 98 0. 35 130 -140 86% Mombasa - Nairobi 2. 26 0. 83 0. 53 90 -100 66% Southern Africa Lusaka - Johannesburg 2. 32 1. 54 0. 34 160 -170 18% Lusaka - Dar-es-Salaam 2. 55 1. 34 0. 44 160 -170 62% West Africa Central Africa An interesting observation: On Central Africa corridor, trucks with lower average yearly mileage have the higher profit margins 16

West Africa Central Africa East Africa Southern Africa Not restrictive Market entry Licenses Not restrictive Market access Bilateral agreement Yes No Yes Quotas/freight allocation Yes No No Queuing system Yes No No Third country rule Prohibited Allowed in some countries Technical regulation (road user charges, axleload, vehicle standard, import restriction) Problem of harmonization of axle-load regulation Problem of enforcement of axle -load regulation Problem of harmonization of axleload regulation, delays at weighbridges Prohibition of second-hand vehicle imports in South Africa Cumbersome transit procedures 1. Prohibition for trailers in transit to pick-up backloads in Kenya 2. Cumbersome transit procedures inducing border-crossing delays Customs regulation Cumbersome transit procedures inducing bordercrossing delays 17

Source: Darbera (1998) 18

Average transport prices (constant and current) from Mombasa to Kigali 19

III. Agriculture in India 20

China Bangladesh India 21

Public expenditures in India Subsidies Public Investment 22

IV. Education in India and Uganda 23

Source: ASER (2005)

All India Teacher Absence Map (Public Schools) Teacher State Source: Kremer, Muralidharan, Chaudhury, Hammer, and Rogers. 2004. “Teacher Absence in India. ” Absence (%) Maharashtra Gujarat Madhya Pradesh Kerala Himachal Pradesh Tamil Nadu Haryana Karnataka Orissa Rajasthan West Bengal Andhra Pradesh Uttar Pradesh Chhatisgarh Uttaranchal Assam Punjab Bihar Jharkhand Delhi All India Weighted 14. 6 17. 0 17. 6 21. 2 21. 3 21. 7 23. 4 23. 7 24. 7 25. 3 26. 3 30. 6 32. 8 33. 8 34. 4 37. 8 41. 9 24. 8%

• • • Definitions Unadjusted Wage is the average wage of teachers in the public and private sector The adjusted wage is what a 25 year old female with a bachelors degree and a 2 -year teacher training course residing locally would earn in the public and private sector Public School Teachers are paid a (lot) more 26

No incentives to perform… Deviation from Mean Salary in Rs -200 0 200 400 600 Teacher Absenteeism and Compensation -400 The public sector pays more absent teachers more 0 10 20 Days Absent per Month Private Schools Salary results are presented as “deviations from mean”. So the number 200 on the vertical axis means that the person’s salary is Rs. 200 more than the average salary for the sector 30 Public Schools The private sector pays more absent teachers less 27 The figure is based on a non-parametric plot of deviations from mean salary against the number of days absent.

Grants for Primary Education in Uganda (PETS) US$ per Student 3. 5 3. 0 • In 1995, survey of 250 primary schools in 19 of 39 districts; 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 1991 1993 Intended Grant Amount 1994 1995 1999 Received by School (mean) 28

Absence rate among teachers Country Bangladesh Ecuador India Indonesia Papua New Guinea Peru Zambia Uganda Rate (percent) 15 14 25 19 15 11 17 27 29

Uganda: What enumerators found 30

V. Health in India and Chad 31

Immunization rates are low and stagnant Source: WDI Indicators Database 32

Distribution of Health Care Subsidies All India, 1995 -6 33 Source: calculations based on Mahal et. al. 2001 – referred to in MTA para. 2. 2. 68

India 2003: Doctor absence from PHC’s by state and reason 34

Quality is low, even when present (Delhi doctors) What they do is in blue, what they know is in red. MBBS doctors are (roughly) the equivalent of MDs in the US. 35 Das and Hammer (2005)

Chad “Although the regional administration is officially allocated 60 percent of the ministry's non-wage recurrent expenditures, the share of the resources that actually reach the regions is estimated to be only 18 percent. The health centers, which are the frontline providers and the entry point for the population, receive less than 1 percent of the ministry's non-wage recurrent expenditures. ” -- Bernard Gauthier and Waly Wane, “Leakage of public resources in the health sector : An empirical investigation of Chad, ” 2008. 36

What can be done? • Information 37

Grants for Primary Education in Uganda (PETS) US$ per Student 3. 5 3. 0 • In 1995, survey of 250 primary schools in 19 of 39 districts; 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 1991 1993 Intended Grant Amount 1994 1995 1999 Received by School (mean) 38

Grants for Primary Education in Uganda • In 1995, survey of 250 primary schools in 19 of 39 districts; • Survey repeated in 1998 and 2000. Primary Education in Uganda (PETS) US$ per Student 3. 5 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 1991 1993 Intended Grant Amount 1994 1995 1999 Received by School (mean) 39

What can be done? • Information • Separate public financing from provision 40

Stipends yield big gains for Bangladesh secondary education 41 Source: World Bank. 2006. Bangladesh: Secondary Education Development Support Credit II. World Bank: Washington, DC.

Rwanda: Results-based Financing Donors Sub-National Government District National Governme nt Results Based Aid Results Based Planning and Budgeting Results Based Contracting for CCT, RB bonuses Hospitals, Health Centers Households 42 or Individuals

National PBF model for Health Centers • • • Learning from 3 pilot experiences (since 2001) Roll-out since May/June 2006 Currently 23 out of 30 districts covered Seven control districts 16 Primary Health Care indicators, e. g. – New Curative Consultation = $0. 27 – Delivery at the HC = $3. 63 – Completely vaccinated child = $ 1. 82 • 14 HIV/AIDS indicators, e. g. – One Pregnant woman tested (PMTCT) = $1. 10 – One couple tested voluntarily (PMTCT)= $1. 10 – HIV+ women treated with NVP = $1. 10 • Separation of functions between stakeholders 43

Increase in Volume of Services (after 27 months) PBF Indicator Institutional Deliveries New Curative Consultations ANC: second dose of TT Family Planning new users Family Planning users at the end of the month January 2006 average/month/ health center ( 258 health centers on average) March 2008 average/month/ health center (286 health centers on average) Percentage increase (linear/log R 2) 21 37. 5 985 1, 489 21 52. 5 15. 5 47. 9 175. 2 711. 6 78% (log 0. 75) 51% (log 0. 19) 150% (log 0. 63) 209% (linear 0. 88) 306% (linear 0. 98) 44

Rwanda 2005 -2008 Indicators DHS-2005 DHS-2008 Contraception (modern) 10% 27% Delivery in Health Centers 39% 52% Infant Mortality rate 86 per 1000 62 per 1000 Under-Five Mortality rate 152 per 103 per 1000 Anemia Prevalence : Children 56% 48% Vaccination : All 75% 80. 4% Vaccination : Measles 86% 90% Use of Insecticide treated nets 4% 67% among children less than 5 45

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How to end poverty Government failure Market failures Efficiency & Equity 48

How to end poverty Market failures Efficiency & Equity Government failure 49