Image by World Bank/Jonathan Ernst
  • Report
  • 9 April 2019

Subnational investment in human capital

Authors

Daniel Coppard, Richard Watts, Amy Dodd, Zach Christensen, Marcus Manuel, Harsh Desai, Stephanie Manea

Investing in the poorest and most vulnerable people is crucial to leaving no one behind. Building people’s wellbeing and boosting their economic potential will equip present and future generations to progress, realise their aspirations and prosper. But investments from donors and governments in human capital are not sufficiently targeting the countries and subnational regions where poverty is the highest. Leaving no one behind will require addressing inequalities within as well as between countries.

This report looks at how effectively subnational financing from donors and governments targets poverty. Researched in partnership by Overseas Development Institute (ODI) and Development Initiatives (DI), it reviews subnational spending, by both governments and donors, on health and education. The analysis of the 82 poorest countries – that is all LDCs (Least Developed Countries), LICs (Low-Income Countries) and LMICs (Lower-Middle Income Countries) – aims to improve understanding of health and education needs at the subnational level and interrogate how effectively resource allocation is meeting these needs among the poorest and most vulnerable people.

Key findings

Subnational targeting of health and education spending

  • On average, poorer regions receive less government funding than wealthier ones. This is true for both education and health with the difference clearer for education; on average, poorer regions receive 15% less than the national average for education.
  • On average, poorer regions receive the same level of donor support in education as the national average. In the nine countries where data is available, there is a spread of allocations with poorer regions receiving less in five and more in four.
  • On average, poorer regions receive a slightly higher level of donor support for health than the national average.
  • Data on how finance is allocated at the subnational level is markedly lacking
  • Only one in seven countries publishes adequate budget data and only one in eleven publishes adequate aid data.

International and national targeting of health and education spending

  • At a global level, only a third of all aid goes to the LDCs, way below the half that is needed to support the investment needs for the two key sectors for human capital: education and health. There is clear scope for improvement with the best donors eight times more efficient than the worst at targeting those in greatest financial need.
  • At a national level, none of the LDCs – and none of the other low-income and lower-middle income countries (LICs and LMICs) – meet the internationally recognised targets for the share of their domestic resources that is spent on education and health (UNESCO, 2015 and Abuja Declaration, 2001), although some LICs do manage to achieve 75%.

Recommendations

Improve targeting

National governments should commit to:

  • increasing the share of taxes spent on health and education from an average of two-thirds to a minimum of three-quarters of the internationally recognised spending targets for health and education;
  • ensuring the poorest regions receive at least the same health and education funding as the national average and assessing what funding is necessary in addition to this.

Donors should commit to:

  • increasing ODA to LDCs from one-third to a minimum of half of total ODA;
  • providing the poorest subnational regions with greater per-person spend than the national average, while recognising the need to address inequalities within regions.

Increase transparency

National governments should:

  • publish the subnational financial data they have;
  • at least include information on the number of teachers and health workers at subnational level in the national budget documents.

Donors – especially the five largest in terms of ODA spend – should:

  • disaggregate their information on spending subnationally and ensure this data is publicly available, and reported to government, particularly in the most aid-dependent and poorest countries.

Read the full report

The report was authored by: Marcus ManuelDan CoppardAmy Dodd, Harsh Desai, Richard WattsZach Christensen and Stephanie Manea

Photo: World Bank