Three essays on education from the perspective of the economics of public setor

This work consists of three essays organized into chapters that seek to answer questions at first sight unrelated, but with one common denominator, which is the scarcity of public resources devoted to education, overall, especially in lower education. . The first chapter deals with the scarcity of resources devoted to education in a context of population aging. Two hypotheses were tested for Brazilian municipalities on the relationship between the aging of the population and educational expenditure. The first, already proven in the literature, is that there is an intergenerational conflict for resources and the increase of the share of elderly in the population reduces the educational expenditure. The second, proposed here for the first time, is that there should be reduction of competition for resources if there is a relationship of co-residence between young and old. The results indicated that an increase in the share of elderly reduces the educational expenditure per youth. But the results also illustrate that an increase in the share of elderly co-residing with youth (family arrangement more common in Latin American countries) raises the educational expenditure, which reflects a reduction of competition for resources between generations. The second chapter assesses the allocative efficiency of investments in Higher Education. Using the difference between first-year and last-year students’ scores from Enade aggregated by HEI as a product in the Stochastic Production Function, is possible to contribute with a new element in the literature aimed at estimating the production function of education. The results show that characteristics of institutions are the variables that best explain the performance of students, and that public institutions are more inefficient than the private ones. Finally, the third chapter presents evidence that the allocation of public resources in early childhood education is important for a better future school performance. In this chapter was calculated the effects of early childhood education on literacy scores of children attending the 2nd grade of elementary school. The results using OLS and propensity score matching show that students who started school at the ages to 5, 4, and 3 years had literacy scores between 12.22 and 19.54 points higher than the scores of those who began school at the ages 6 years or late. The results also suggest that the returns in terms of literacy scores diminish in relation to the number of years of early childhood education.

Three essays on local demand for public services

Local provision of public services has the positive effect of increasing the efficiency because each locality has its idiosyncrasies that determine a particular demand for public services. This dissertation addresses different aspects of the local demand for public goods and services and their relationship with political incentives. The text is divided in three essays. The first essay aims to test the existence of yardstick competition in education spending using panel data from Brazilian municipalities. The essay estimates two-regime spatial Durbin models with time and spatial fixed effects using maximum likelihood, where the regimes represent different electoral and educational accountability institutional settings. First, it is investigated whether the lame duck incumbents tend to engage in less strategic interaction as a result of the impossibility of reelection, which lowers the incentives for them to signal their type (good or bad) to the voters by mimicking their neighbors’ expenditures. Additionally, it is evaluated whether the lack of electorate support faced by the minority governments causes the incumbents to mimic the neighbors’ spending to a greater extent to increase their odds of reelection. Next, the essay estimates the effects of the institutional change introduced by the disclosure on April 2007 of the Basic Education Development Index (known as IDEB) and its goals on the strategic interaction at the municipality level. This institutional change potentially increased the incentives for incumbents to follow the national best practices in an attempt to signal their type to voters, thus reducing the importance of local information spillover. The same model is also tested using school inputs that are believed to improve students’ performance in place of education spending. The results show evidence for yardstick competition in education spending. Spatial auto-correlation is lower among the lame ducks and higher among the incumbents with minority support (a smaller vote margin). In addition, the institutional change introduced by the IDEB reduced the spatial interaction in education spending and input-setting, thus diminishing the importance of local information spillover. The second essay investigates the role played by the geographic distance between the poor and non-poor in the local demand for income redistribution. In particular, the study provides an empirical test of the geographically limited altruism model proposed in Pauly (1973), incorporating the possibility of participation costs associated with the provision of transfers (Van de Wale, 1998). First, the discussion is motivated by allowing for an “iceberg cost” of participation in the programs for the poor individuals in Pauly’s original model. Next, using data from the 2000 Brazilian Census and a panel of municipalities based on the National Household Sample Survey (PNAD) from 2001 to 2007, all the distance-related explanatory variables indicate that an increased proximity between poor and non-poor is associated with better targeting of the programs (demand for redistribution). For instance, a 1-hour increase in the time spent commuting by the poor reduces the targeting by 3.158 percentage points. This result is similar to that of Ashworth, Heyndels and Smolders (2002) but is definitely not due to the program leakages. To empirically disentangle participation costs and spatially restricted altruism effects, an additional test is conducted using unique panel data based on the 2004 and 2006 PNAD, which assess the number of benefits and the average benefit value received by beneficiaries. The estimates suggest that both cost and altruism play important roles in targeting determination in Brazil, and thus, in the determination of the demand for redistribution. Lastly, the results indicate that ‘size matters’; i.e., the budget for redistribution has a positive impact on targeting. The third essay aims to empirically test the validity of the median voter model for the Brazilian case. Information on municipalities are obtained from the Population Census and the Brazilian Supreme Electoral Court for the year 2000. First, the median voter demand for local public services is estimated. The bundles of services offered by reelection candidates are identified as the expenditures realized during incumbents’ first term in office. The assumption of perfect information of candidates concerning the median demand is relaxed and a weaker hypothesis, of rational expectation, is imposed. Thus, incumbents make mistakes about the median demand that are referred to as misperception errors. Thus, at a given point in time, incumbents can provide a bundle (given by the amount of expenditures per capita) that differs from median voter’s demand for public services by a multiplicative error term, which is included in the residuals of the demand equation. Next, it is estimated the impact of the module of this misperception error on the electoral performance of incumbents using a selection models. The result suggests that the median voter model is valid for the case of Brazilian municipalities.