File2-page151 - Duflo (2001) Human Capital Perception of...

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Unformatted text preview: Duflo (2001) Human Capital Perception of fixed budgets and falling levels of financing per capita – focus on the potential for private sector financing, for example, through the imposition of user fees – appropriate in some circumstances and for particular types of intervention (in particular non-basic interventions) – should not be viewed as a panacea and cannot be relied upon to solve the problem of financing or to ensure universal coverage of basic health and education Two assumptions underlie the prevalent view that (public) basic health and education budgets are of relatively constant size (i) limited administrative capability and other constraints are taken to imply that overall tax capacity is fixed in most developing countries (ii) assumed that the allocation of revenue to different heads of expenditure is fixed by political and other considerations Tax reform: taxation represents the only sustainable form of financing basic health and education in developing countries – aid, debt and inflation finance are not sustainable and may ultimately reduce financing capacity Expansion of financing for these services is thus linked to the tax reform process where the overall objective is to raise the necessary revenue in the most efficient and least distortionary manner Developing countries – both the theory of taxation and structure of constraints imply that greater emphasis should be placed on indirect as opposed to direct taxes, e.g., VAT can make significant contributions whereas systems which rely on the monitoring and extraction of personal contributions (e.g. formal social security systems) are unlikely to advance us much towards the goal of universal coverage Expenditure reform is critical to achieving adequate public finance for basic health and education Prioritisation of basic health and education expenditures needs to take Development Economics, LSE Summer School 2007 148 ...
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