PUBLIC EXPENDITURE ANALYSIS

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1 A PUBLIC SECTOR GOVERNANCE AND ACCOUNTABILITY SERIES PUBLIC EXPENDITURE ANALYSIS Edited by ANWAR SHAH THE WORLD BANK Washington, D.C.

2 Contents Other Forthcoming Books of Related Interest ii Foreword Preface xiii xi Acknowledgments xv Contributors xvi Overview by Anwar Shah xix CHAPTER Public Expenditure Incidence Analysis 1 by Giuseppe Ruggeri General Issues 2 The Allocation of Public Expenditures 15 Distributional Effects 25 Conclusions 29

3 vi Contents On Measures of Inequality and Poverty with Welfare Implications 33 by Nanak Kakwani and Hyun Son The Lorenz Curve and Social Welfare 34 Gini Index 36 Calculations of the Gini Index 37 Generalized Gini Index 38 Entropy Measures of Inequality 39 Atkinson's Inequality Measures 40 Measuring Poverty 42 An Illustration Using Lao PDR Data 44 Some Concluding Remarks 47 On Assessing the Equity of Governments' Fiscal Policies, with Application to the Philippines 49 by Hyun Son Welfare Measures 50 Welfare and Income Components 52 Welfare Reform Index 55 Indirect Taxes and Subsidies 56 An Overview of the Philippines' Fiscal System 57 Basis for Measuring Distributional Effects 61 Analysis of Empirical Results 62 Some Concluding Remarks 67 Evaluating Public Pensions 69 by Robin Boadway and Katherine Cuff The Imperative for Public Pension Reform and Development 69 The Rationale for Government Intervention 72 Transfers to the Elderly 88 Contributory Pension Schemes 99 Encouragement of Voluntary Provision for Retirement 125 Conclusion: Issues for Evaluation 128

4 Contents vii Gender in Public Expenditure Reviews 135 by Barbara Bergmann Choice and Range of Topics 137 Methodology of Analysis 139 Provision of Data 141 Remedies and Changes in Policy and Budget 142 Examples of Gender- Sensitive Budgetary Analysis 144 Summary 151 Citizen-Centered Governance: A New Approach to Public Sector Reform 153 by Matthew Andrews and Anwar Shah The Public Sector Reform Challenge in Developing Countries 154 Conventional Reform Approaches, the Legacy They Leave, and Their Problems 156 A New Citizen-Centered Framework to Guide Reform 165 Conclusion 172 Toward Citizen-Centered Local-Level Budgets in Developing Countries 183 by Matthew Andrews and Anwar Shah Citizens and the Common Approaches to Budgeting in Local Developing Countries 184 Citizens Analyzing Municipal Finances in Developing Countries: A New Approach 190 Conclusion 215 Voice Mechanisms and Local Government Fiscal Outcomes: How Do Civic Pressure and Participation Influence Public Accountability? 217 by Matthew Andrews Background 218 The Link between Public Sector Accountability and Civic Voice 219

5 VIII Contents Reforms Focused on Enhancing Voice and Accountability 220 A Research Approach 222 Observations about the Link between Voice, Voice Mechanisms, and Accountability 223 Conclusion 241 BOXES 1.1 Components of Various Income Concepts A Classification of Government Expenditures Selected Groupings of Government Expenditures 26 FIGURES 2.1 Lorenz Curve The Process Bias of Common Reform Combinations The Top-Down, Centralizing Nature of Common Reform Combinations (a) A Roadmap for Citizen-Centered Governance (b) Citizen-Centered Reform Formalizing the Results Focus Citizen-Centered Reform Influences on Governance Tools for Results-Oriented Management External Citizen Focus Voice Mechanisms, Voice Expression, and Accountability Voice Expression and Accountability Effects of Mechanism Adoption Voice Mechanisms, Voice Expression, and Accountability (Observed Experience) 242 TABLES 1.1 Global Indexes of Redistribution Based on Comparisons of Gini Coefficients Calculation of the Gini Index Inequality in Lao PDR Poverty Measures: Lao PDR Fiscal System in the Philippines: Government Expenditures by Functional Classification Welfare Reform Index for Income Components: Philippines, Welfare Reform Index for Expenditures: Philippines,

6 Contents ix 5.1 Summary of South African Gender Budget Document Summary of Gender Budget Document for Barbados Common Governance and Administrative Weaknesses in Developing Countries Major Themes and Elements of Reform in the Development World Key Elements of Citizen-Centered Governance Reforms Citizen-Centered Budgeting A Typical Budget Process and Time Line for Local Governments in Developing Countries A Typical Local Government Budget and Financial Statement in Developing Countries Institutions Facilities A Move toward Citizen-Oriented Budgeting Processes Citizen-Oriented Revelation Records: An Example Citizen-Oriented Reflection and Resolution Records: An Example Citizen-Oriented Reporting Records: An Example A Citizen-Oriented Budget Format 210

PUBLIC EXPENDITURE ANALYSIS

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