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Improving Basic Services for the Bottom Forty Percent: Lessons from Ethiopia

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Ethiopia, like most developing countries, has opted to deliver services such as basic education, primary health care, agricultural extension advice, water, and rural roads through a highly decentralized system. That choice is based on several decades of theoretical analysis examining how a decentralized government might respond better to diverse local needs and provide public goods more efficiently than a highly centralized government. Ethiopia primarily manages the delivery of basic services at the woreda (district) level. Those services are financed predominantly through inter-governmental fiscal transfers (IGFTs) from the federal to the regional and then the woreda administrations, although some woredas raise a small amount of revenue to support local services. Since 2006, development partners and the government have co-financed block grants for decentralized services through the Promoting Basic Services (PBS) Program. Aside from funding the delivery of services, the program supports measures to improve the quality of services and local governments’ capacity to deliver them by strengthening accountability and citizen voice. Ethiopia’s model for delivering basic services appears to be succeeding and to confirm that services improve when service providers are more accountable to citizens. As discussed in the World Development Report 2004, accountability for delivering basic services can take an indirect, long route, in which citizens influence service providers through government, or a more direct, short route between service providers and citizens. When the long, indirect route of accountability is ineffective, service delivery can suffer, especially among poor or marginalized citizens who find it challenging to express their views to policymakers. In Ethiopia, the indirect route of accountability works well precisely because of decentralization. Service providers are strictly accountable to local governments for producing results, but in turn, the local authorities are held accountable by the regional and federal governments. A degree of local competition for power and influence helps to induce local authorities and service provides to remain open to feedback from citizens and take responsibility for results. The direct route of accountability has been reinforced by measures to strengthen financial transparency and accountability (educating citizens on local budgets and publicly providing information on budgets and service delivery goals), social accountability (improving citizens’ opportunities to provide feedback directly to local administrators and service providers), and impartial procedures to redress grievances (instituting the independent Ethiopian Institution of the Ombudsman, for example). Woreda-level spending, financed through IGFTs and supported by the PBS Program, has been a very effective strategy for Ethiopia to attain its Millennium Development Goals (MDGs). Spending on health and education accounts for 80 percent of PBS-financed spending by the woredas, which goes to pay for health extension workers (HEWs) and teachers. Although the link between numbers of personnel hired and services delivered must be treated with caution (and is being explored in detail in another study), this study finds evidence that woreda-level spending in health and education is effective. Owing to the intervention of HEWs, the use of health services has increased, especially among the poorest quintiles. Every additional US$ 1 of per capita spending by the woredas on health is associated with a 6.4 percent increase in the contraceptive prevalence rate and an 11.3 percent increase in deliveries by skilled birth attendants (two interventions that can reduce maternal mortality dramatically), as well as a 3.6 percent increase in antenatal care (which can reduce infant and child mortality significantly). For education, an increase of US$ 1 per capita in spending by each woreda is associated with a 3.6 percent increase in the net primary enrollment rate within that woreda. Similar results are seen for the pupil-teacher ratio. Finally, the effect of woreda-level spending on agricultural extension workers is associated with higher yields for major crops, including cereals, vegetables, enset, coffee, and fruit. Spending on agricultural extension workers increases the probability that farmers, regardless of the size of their plots, will use improved farming techniques. Education, health, and agriculture account for 97 percent of woreda spending, which in turn constitutes 97 percent of PBS-financed IGFTs. This is complemented by support for greater engagement among citizens, improvements in local capacity to manage resources, and better access to information on national and local budgeting and development objectives. While it is difficult to provide precise estimates of the impact of the latter activities, the direction of their effect is clear: Spending efficiency is improved through better capacity, more transparency, and greater accountability to citizens. In interpreting these results, it is important to bear in mind that the chain of causality from woreda spending to results is direct for education: Spending on teachers directly drives enrollments. For health and agriculture, on the other hand, spending at the woreda level on health and agricultural extension workers is best described as catalytic, because it increases the effectiveness of system-wide spending (federal capital investments in medical infrastructure, for example, or national research to develop improved varieties for farmers). Yet overall, these findings demonstrate the power of the PBS-financed decentralized approach for improving access to basic services, encouraging broadly shared development, and propelling Ethiopia rapidly toward the MDGs.
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A WORLD BANK STUDY
Qaiser M. Khan,
Jean-Paul Faguet, Christopher Gaukler,
and Wendmsyamregne Mekasha
Improving Basic
Services for the
Bottom Forty Percent
LESSONS FROM ETHIOPIA
Improving Basic Services for the Bottom
Forty Percent
A WORLD BANK STUDY
Improving Basic Services for the
Bottom Forty Percent
Lessons from Ethiopia
Qaiser M. Khan, Jean-Paul Faguet, Christopher Gaukler,
and Wendmsyamregne Mekasha
© 2014 International Bank for Reconstruction and Development / The World Bank
1818 H Street NW, Washington DC 20433
Telephone: 202-473-1000; Internet: www.worldbank.org
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Attribution—Please cite the work as follows: Khan, Qaiser M., Jean-Paul Faguet, Christopher Gaukler, and
Wendmsyamregne Mekasha. 2014. Improving Basic Services for the Bottom Forty Percent: Lessons from
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ISBN (paper): 978-1-4648-0331-4
ISBN (electronic): 978-1-4648-0333-8
DOI: 10.1596/978-1-4648-0331-4
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Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
vImproving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
Contents
Foreword xi
Acknowledgments xiii
About the Authors xv
Executive Summary xvii
Abbreviations xxiii
Introduction and Background 1
Context and Structure of This Book 3
The Promoting Basic Services Program 3
Notes 8
Chapter 1 Conceptual Framework and Methodology 9
Notes 13
Chapter 2 Citizen Direct Voice and Accountability 15
Decentralization and the Quality and Appropriateness
of Local Services 16
Financial Transparency and Accountability 17
Social Accountability 18
Grievance Redress Mechanisms 18
Notes 19
Chapter 3 Effectiveness of Woreda Block Grant Spending
on Education, Health, and Agriculture 21
A Positive Association between Woreda Block
Spending and Results in Education 21
A Positive Association between Woreda Block Grant
Spending and Results in Health 22
A Positive Association between Woreda Block Grant
Spending and Results in Agriculture 25
Notes 28
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Chapter 4 How Equitable Is Decentralized Spending
at the Woreda Level? 29
Woreda Block Grant Spending on Health Improves
Outcomes, Especially for the Rural Poor 29
Incidence Analysis of Woreda Block Grant Spending
on Health and Education 32
Catalytic Effect of Spending on Extension Services
by Plot Size 33
Gender Equity Analysis for Woreda Block Grant
Spending 33
Notes 35
Chapter 5 The Federal System’s Role in Helping Lagging Areas
and Groups 37
Regionally Disaggregated Analysis of Woreda Block Grant
Spending 37
Ethnically Disaggregated Analysis of Woreda Block Grant
Spending 39
Notes 41
Conclusions and Recommendations 43
Appendix A Detailed Methodology and Data Sources 45
Appendix B Financial Transparency and Social Accountability
under the PBS Program 53
Appendix C The Center and the Periphery in Ethiopia:
The Evolution of Today’s Federal State 55
Appendix D Detailed Regression Results 59
Bibliography 105
Boxes
I.1 The Indirect Route of Accountability Through Policy Makers
to Service Providers 5
1.1 Some Caveats on Interpreting the Results of This Study 10
2.1 The Direct Route of Accountability—Citizen Direct Voice
and Accountability Models in Ethiopia 15
3.1 Ethiopia’s Health Extension Program and Health
Extension Workers 22
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Figures
I.1 The Triangle of Accountability in Service Delivery 4
1.1 Conceptual Model of the Results Chain of PBS Spending 9
1.2 Woreda-Level Expenditure in the Five PBS Sectors, 2011 12
3.1 Growth in Extension Services and Woredas’ Expenditure on
Agriculture, 2008–11 25
3.2 Production by Crop, 2011 27
4.1 Percent Improvement in Selected Health Indicators Among
Rural People between 2005 and 2011, by Wealth Quintile 30
5.1 Woreda Total Recurrent Expenditure Per Capita, 2010 38
Tables
I.1 Federal Block Grants and PBS Program Disbursements 6
I.2 Total Woreda Recurrent Expenditures by Region 7
3.1 Association of Log of Per Capita Education Expenditure
with Log of Education Outcomes 22
3.2 Association of Log of Per Capita Health Expenditure
with Health Outcomes 24
3.3 Effect on Farmers’ Use of Extension Services of ETB 1
Per Capita Spending on Agricultural Extension Workers 26
3.4 Association of Log of Per Capita Spending on Agricultural
Extension Workers with Log of Yield 28
4.1 Predicted Probabilities for “Successful” Health Outcomes
by Place of Residence and Wealth Quintile if an HEW
Visited the Household in the Past Year 31
4.2 Incidence of Woreda-Level Spending by Wealth Quintile 32
4.3 Effect of ETB 1 Spending on Agricultural Extension Workers
on Probability of Using Improved Farming Techniques,
by Plot-Size Quintile, 2011 33
4.5 Association of Log of Education Expenditure with Log of Net
Enrollment Rate and Log of Net Intake Rate, by Gender 34
4.5 Predicted Probabilities of Improved Farming Techniques Being
Used on a Field, by Gender of Household Head, 2011 35
5.1 Woredas Spending More Than 110 Percent of the National
Average on Basic Services, by Region, 2010 38
5.2 Selected Ethnicities’ Influence on Total Woreda Recurrent
Expenditure Per Capita 40
A.1 Variables in the Poverty and Social Impact Analysis Database,
by Administrative Level 48
C.1 Ethiopian Regional Population Distribution and
Ethnic Composition 56
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D.1 Stage 1: Education—Linear Regression Association of Per Capita
Education Expenditures with Net Enrollment Rate 59
D.2 Stage 1: Education—Quadratic Regression Association of
Per Capita Education Expenditures with Net Enrollment Rate 60
D.3 Stage 1: Education—Log Linear Regression Association of Per
Capita Education Expenditures with Net Enrollment Rate 61
D.4 Stage 1: Education—Linear Regression Association of Per
Capita Education Expenditures with Pupil-Teacher Ratio 62
D.5 Stage 1: Education—Quadratic Regression Association of
Per Capita Education Expenditures with Pupil-Teacher Ratio 63
D.6 Stage 1: Education—Log Linear Regression Association of Per
Capita Education Expenditures with Pupil-Teacher Ratio 64
D.7 Stage 1: Health—Linear Regression Association of Per
Capita Health Expenditures with Penta3 Vaccination Rate 65
D.8 Stage 1: Health—Quadratic Regression Association of
Per Capita Health Expenditures with Penta3 Vaccination Rate 66
D.9 Stage 1: Health—Log Linear Regression Association of
Per Capita Health Expenditures with Penta3 Vaccination Rate 67
D.10 Stage 1: Health—Linear Regression Association of Per Capita
Health Expenditures with Antenatal Care 68
D.11 Stage 1: Health—Quadratic Regression Association of Per
Capita Health Expenditures with Antenatal Care 69
D.12 Stage 1: Health—Log Linear Regression Association of Per
Capita Health Expenditures with Antenatal Care 70
D.13 Stage 1: Health—Linear Regression Association of Per Capita
Health Expenditures with Contraceptive Acceptance Rate 71
D.14 Stage 1: Health—Quadratic Regression Association of Per Capita
Health Expenditures with Contraceptive Acceptance Rate 72
D.15 Stage 1: Health—Log Linear Regression Association of Per Capita
Health Expenditures with Contraceptive Acceptance Rate 73
D. 16 Stage 1: Health—Linear Regression Association of Per Capita
Health Expenditures with Delivery by Skilled Birth Attendant 74
D.17 Stage 1: Health—Quadratic Regression Association of Per Capita
Health Expenditures with Delivery by Skilled Birth Attendant 75
D.18 Stage 1: Health—Log Linear Regression Association of Per Capita
Health Expenditures with Delivery by Skilled Birth Attendant 76
D.19 Stage 1: Agriculture—Log Linear Regression Association
of Per Capita Agriculture Expenditures with Cereal Yield 77
D.20 Stage 1: Agriculture—Log Linear Regression Association
of Per Capita Agriculture Expenditures with Pulses Yield 79
D.21 Stage 1: Agriculture—Log Linear Regression Association
of Per Capita Agriculture Expenditures with Root Crop Yield 81
D.22 Stage 1: Agriculture—Log Linear Regression Association
of Per Capita Agriculture Expenditures with Vegetable Yield 83
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D.23 Stage 1: Agriculture—Log Linear Regression Association
of Per Capita Agriculture Expenditures with Oil Seeds Yield 85
D.24 Stage 1: Agriculture—Log Linear Regression Association
of Per Capita Agriculture Expenditures with Enset Yield 87
D.25 Stage 1: Agriculture—Log Linear Regression Association
of Per Capita Agriculture Expenditures with Fruit Yield 89
D.26 Stage 1: Agriculture—Log Linear Regression Association
of Per Capita Agriculture Expenditures with Coffee Yield 91
D.27 Stage 3: Agriculture—Predicted Probabilities for Farmers’
Use of Any Improved Technique, 2011 93
D.28 Gender Issues: Linear Regression Association of Per Capita
Education Expenditures with Net Enrollment Rate for Males 95
D.29 Gender Issues: Quadratic Regression Association of Per Capita
Education Expenditures with Net Enrollment Rate for Males 96
D.30 Gender Issues: Log Linear Regression Association of Per Capita
Education Expenditures with Net Enrollment Rate for Males 96
D.31 Gender Issues: Linear Regression Association of Per Capita
Education Expenditures with Net Enrollment Rate for Females 97
D.32 Gender Issues: Quadratic Regression Association of Per Capita
Education Expenditures with Net Enrollment Rate for Females 97
D.33 Gender Issues: Log Linear Regression Association of Per Capita
Education Expenditures with Net Enrollment Rate for Females 98
D.34 Gender Issues: Linear Regression Association of Per Capita
Education Expenditures with Net Intake Rate for Males 98
D.35 Gender Issues: Quadratic Regression Association of Per Capita
Education Expenditures with Net Intake Rate for Males 99
D.36 Gender Issues: Log Linear Regression Association of Per Capita
Education Expenditures with Net Intake Rate for Males 99
D.37 Gender Issues: Linear Regression Association of Per Capita
Education Expenditures with Net Intake Rate for Females 100
D.38 Gender Issues: Quadratic Regression Association of Per Capita
Education Expenditures with Net Intake Rate for Females 100
D.39 Gender Issues: Log Linear Regression Association of Per Capita
Education Expenditures with Net Intake Rate for Females 101
D.40 Gender Issues: Predicted Probabilities for Farmers’ Use of Any
Improved Technique by Gender, 2011 101
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Foreword
When Ethiopia embarked on a program of improving service delivery by decen-
tralizing power to the third, or woreda, level, we were initially skeptical. In the
World Development Report 2004: Making Services Work for Poor People, we
asserted that the delivery of basic services requires two things: First, citizens must
be able to hold politicians accountable for allocating resources and monitoring
results; second, politicians in turn must be able to hold service providers—teach-
ers, doctors, nurses—accountable for quality delivery of services. We called these
the two legs of the “long route of accountability.” While Ethiopia’s strong party
affiliations and military traditions would make the second leg of the long route
work well, the limited political competition at the national level potentially
could weaken the first leg. Furthermore, whereas in principle decentralizing to
the subnational level would make these accountability relationships work bet-
ter—citizens would be closer to political leaders, and politicians could better
monitor service providers—the limited capacity in some of the woredas could act
as a brake on progress.
Our skepticism was unwarranted. Ethiopia has experienced a remarkable
improvement in service delivery outcomes. Child mortality has fallen from 123
per thousand in 2005 to 88 in 2010, and the primary net enrollment rate rose
from 68 percent in 2004/05 to 82 percent in 2009/10. This richly documented
and analytically rigorous book explains why. While political competition at the
national level remains limited, competition at the local level is healthy, with
officials’ career advancement depending on their being able to meet develop-
ment and service delivery targets. The government has introduced social account-
ability mechanisms such as grievance redress through the Ethiopian Institution
of the Ombudsman, financial transparency (the local budgets are posted in com-
mon areas), and citizen feedback on budget preparation and implementation.
The government has also strengthened the second leg of the long route of
accountability by recruiting teachers, health workers, and agricultural extension
workers locally, and rates of provider absenteeism are now lower than in other
countries in Africa. Greater citizen participation and the intrinsic motivation of
people working in their local areas may have helped overcome the initially weak
administrative capacity.
xii Foreword
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
The relative success of Ethiopia’s decentralized service delivery program is not
a reason to be complacent, however. The achievements have arisen from a low
base; Ethiopia remains one of the poorest countries in the world. The progress on
indicators that people care about—students’ learning and overall health status—
has not been impressive. As these indicators are more specific to the individual,
their achievement will require an even sharper focus on citizen voice and par-
ticipation. Ethiopia has demonstrated how much can be achieved by opening up
the system to greater accountability “from below.” Just think how much more can
be achieved by going further—and allowing poor people to participate fully in
the delivery of services that are so important to them and their children.
Shantayanan Devarajan and Ritva Reinikka
Co-Director, World Development Report 2004
xiiiImproving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
This book was written by Qaiser M. Khan (Lead Economist, World Bank), Jean-
Paul Faguet (Professor for the Political Economy of Development, London
School of Economics), Christopher Gaukler (Consultant, World Bank) and
Wendm syamregne Mekasha (Senior Social Protection, Specialist, World Bank).
This book is based on a World Bank report (84215-ET) developed with fund-
ing from the World Bank and a Trust Fund for Enhanced Supervision of Ethiopia’s
Promoting Basic Services program, supported mostly by the UK Department for
International Development (DFID). That report benefited from suggestions pro-
vided by the peer reviewers—Robert Chase (Lead Economist, World Bank),
Nazmul Chaudhury (Lead Economist, World Bank), Andrew Dabalen (Lead
Poverty Specialist, World Bank), and Philip O’Keefe (Lead Economist, World
Bank)—and other colleagues present at the review meeting, including DFID’s
Ethiopia Team, Andrew Goodland (Senior Agriculture Economist, World Bank),
Ruth Hill (Senior Economist, World Bank), and Thanh Thi Mai (Senior Education
Economist, the World Bank). Before the review meeting, Yoseph Abdissa (Senior
Social Protection Specialist, World Bank), Colin Andrews (Senior Social
Protection Specialist, World Bank), Carlo del Ninno (Senior Economist, World
Bank), G.N.V. Ramana (Lead Public Health Specialist, World Bank), and Huihui
Wang (Senior Health Economist, World Bank) also provided comments on the
report. The authors would also like to acknowledge the technical guidance and
advice received from Deon Filmer (Lead Economist, World Bank) and Lynne
Sherburne-Benz (Sector Manager, World Bank). Members of the Ethiopian gov-
ernment who provided invaluable assistance include Ato Temesgen Walelign
(Development Planning and Research Directorate); Ato Degu Lakew
(Government Accounts); Ato Alemayhu Gebretsadik, Ato Biratu Yigezu, and
Ato Habekristos Beyene (Central Statistical Agency); Ato Feta Zeberga (Ministry
of Agriculture); Ato Asmelash Mersa (Ministry of Education); and Ato Wondimu
Ayele (Ministry of Health and Economic Development). Support from Ato
Getachew Negera, Head of Channel One Program Coordinating Unit (Ministry
of Finance), is also gratefully acknowledged. Any errors and omissions are the
responsibility of the authors.
We thank Shantayanan Devarajan and Ritva Reinikka, Co-Director, World
Development Report 2004, for writing the foreword to this book.
Acknowledgments
xiv Acknowledgments
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
Kavita Watsa and Chandrani Ray provided advice and assistance in the pro-
duction of this book, which was edited by Kelly Cassaday and benefited from the
support of Sofia Said, Team Assistant, World Bank. Gelila Wodeneh,
Communications Officer, the World Bank also provided support and advice.
xvImproving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
Qaiser M. Khan is Lead Economist working on Africa. He has worked on social
protection and basic services for the poor at the World Bank since 1989, all over
Africa, the Middle East, and Asia, and he has written considerably on the subject.
Before joining the World Bank, he taught economics in the United States and
worked for a management consulting firm out of New York and for a nongovern-
mental organization in Bangladesh. He has a PhD and two master’s degrees from
the University of Pennsylvania in Philadelphia, Pennsylvania, United States, and
a bachelor’s degree from Colby College in Waterville, Maine, United States.
Jean-Paul Faguet is Professor of the Political Economy of Development at the
London School of Economics. He is also Chair of the Decentralization Task Force
of the Initiative for Policy Dialogue at Columbia University. His research blends
quantitative and qualitative methods to investigate the institutions and organiza-
tional forms that underpin rapid development. He has published extensively in
the academic literature, including Governance from Below: Decentralization and
Popular Democracy in Bolivia (University of Michigan Press), which won the
W.J.M. Mackenzie Prize for best political science book of 2012. He also recently
edited a special issue of World Development on “Decentralization and Governance”
(2013), and co-edited Descentralización y democratización en Bolivia: La historia
del Estado débil, la sociedad rebelde y el anhelo de democracia (with M. Zuazo and
G. Bonifaz; Friedrich Ebert Stiftung, 2012). His teaching and research focus on
comparative political economy, new institutional economics, economic develop-
ment, and economic history. Faguet has a PhD from the London School of
Economics, a master’s degree from the JFK School at Harvard, and his bachelor’s
degree from Princeton University.
Christopher Gaukler is a consultant for the World Bank’s Africa Social Protection
Unit and has been working on Ethiopia since 2006. He focuses on monitoring
and evaluation for the Basic Services team. Between 2011 and 2012, Gaukler
worked as a monitoring and evaluation specialist for the government of South
Sudan in the Ministry of Gender, Child, and Social Welfare. He has a master’s
degree from the School of Advanced International Studies at the Johns Hopkins
University and an undergraduate degree from the University of Virginia.
About the Authors
xvi About the Authors
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
Wendmsyamregne Mekasha (Wendm) is a Senior Social Protection Specialist in
the World Bank office based in Addis Ababa, Ethiopia. He works on program
monitoring and evaluation, building nationwide management information sys-
tems, and designing and implementing various analytical works including impact/
process evaluation for programs and projects. Mekasha received his bachelor’s
degree in mathematics from Addis Ababa University (Ethiopia), his master’s
degree in agricultural economics from Haromaya University (Ethiopia), and his
master’s of liberal arts in general management from Harvard University (United
States).
xviiImproving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
Ethiopia, like most developing countries, has opted to deliver services such as
basic education, primary health care, agricultural extension advice, water, and
rural roads through a highly decentralized system (Manor 1999; Treisman 2007).
That choice is based on several decades of theoretical analysis examining how a
decentralized government might respond better to diverse local needs and pro-
vide public goods more efficiently than a highly centralized government.1
Ethiopia primarily manages the delivery of basic services at the woreda (dis-
trict) level. Those services are financed predominantly through intergovernmental
fiscal transfers (IGFTs) from the federal to the regional and then the woreda
administrations, although some woredas raise a small amount of revenue to sup-
port local services. Since 2006, development partners and the government have
cofinanced block grants for decentralized services through the Promoting Basic
Services (PBS) Program. Aside from funding the delivery of services, the program
supports measures to improve the quality of services and local governments’
capacity to deliver them by strengthening accountability and citizen voice.2
Objectives
This study attempts to determine the extent to which spending at the woreda
level on basic services is associated with key policy outputs and human outcomes.
Woreda-level block grants primarily support locally recruited staff who provide
basic services in five sectors (health, education, agriculture, water and sanitation,
and rural roads). Because of limitations in the data, the analysis focuses on health,
education, and agriculture. A parallel objective of the study is to assess the inci-
dence of these expenditures by wealth quintile, in line with the World Bank’s
objective of achieving shared growth by reaching the bottom 40 percent. A final
objective is to investigate whether the allocation of woreda-level block grants
reflects the constitutional objective of providing additional resources to histori-
cally marginalized populations. In other words, how effective and equitable is
spending on basic services at the woreda level? The study also looks at the effec-
tiveness of efforts to improve financial transparency and accountability, social
accountability, and grievance redress mechanisms, because of their strong influ-
ence on the availability and quality of basic services.
Executive Summary
xviii Executive Summary
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
Overall Findings on the Effectiveness of a Decentralized Approach to
Service Delivery
Ethiopia’s model for delivering basic services appears to be succeeding and to
confirm that services improve when service providers are more accountable to
citizens. As discussed in the World Development Report 2004 (World Bank 2003),
accountability for delivering basic services can take an indirect, long route, in
which citizens influence service providers through government, or a more direct,
short route between service providers and citizens. When the long, indirect route
of accountability is ineffective, service delivery can suffer, especially among poor
or marginalized citizens who find it challenging to express their views to policy
makers.
In Ethiopia, the indirect route of accountability works well precisely because of
decentralization. Service providers are strictly accountable to local governments
for producing results, but in turn, the local authorities are held accountable by the
regional and federal governments. A degree of local competition for power and
influence helps to induce local authorities and service provides to remain open to
feedback from citizens and take responsibility for results. The direct route of
accountability has been reinforced by measures to strengthen financial transpar-
ency and accountability (educating citizens on local budgets and publicly provid-
ing information on budgets and service delivery goals), social accountability
(improving citizens’ opportunities to provide feedback directly to local administra-
tors and service providers), and impartial procedures to redress grievances (insti-
tuting the independent Ethiopian Institution of the Ombudsman, for example).
Woreda-level spending, financed through IGFTs and supported by the PBS
Program, has been a very effective strategy for Ethiopia to attain its Millennium
Development Goals (MDGs). Spending on health and education accounts for 80
percent of PBS-financed spending by the woredas, which goes to pay for health
extension workers (HEWs) and teachers. Although the link between numbers of
personnel hired and services delivered must be treated with caution (and is being
explored in detail in another study), this study finds evidence that woreda-level
spending in health and education is effective.
Owing to the intervention of HEWs, the use of health services has increased,
especially among the poorest quintiles. Every additional US$1 of per capita
spending by the woredas on health is associated with a 7.5 percent increase in
the contraceptive prevalence rate and an 12.4 percent increase in deliveries by
skilled birth attendants (Wang et al., forthcoming) (two interventions that can
reduce maternal mortality dramatically), as well as a 4 percent increase in ante-
natal care (which can reduce infant and child mortality significantly). For educa-
tion, an increase of US$1 per capita in spending by each woreda is associated
with a 3.7 percent increase in the net primary enrollment rate within that
woreda. Similar results are seen for the pupil-teacher ratio.
Finally, the effect of woreda-level spending on agricultural extension workers
is associated with higher yields for major crops, including cereals, vegetables,
enset, coffee, and fruit. Spending on agricultural extension workers increases the
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probability that farmers, regardless of the size of their plots, will use improved
farming techniques.
Education, health, and agriculture account for 97 percent of woreda spending,
which in turn constitutes 97 percent of PBS-financed IGFTs. This is comple-
mented by support for greater engagement among citizens, improvements in
local capacity to manage resources, and better access to information on national
and local budgeting and development objectives. While it is difficult to provide
precise estimates of the impact of the latter activities, the direction of their effect
is clear: Spending efficiency is improved through better capacity, more transpar-
ency, and greater accountability to citizens.
In interpreting these results, it is important to bear in mind that the chain of
causality from woreda spending to results is direct for education: Spending on
teachers directly drives enrollments. For health and agriculture, on the other
hand, spending at the woreda level on health and agricultural extension workers
is best described as catalytic, because it increases the effectiveness of systemwide
spending (federal capital investments in medical infrastructure, for example, or
national research to develop improved varieties for farmers). Yet overall, these
findings demonstrate the power of the PBS-financed decentralized approach for
improving access to basic services, encouraging broadly shared development, and
propelling Ethiopia rapidly toward the MDGs.
Improving Accountability and Citizen Voice in Providing Basic Services
The social accountability component of the PBS Program has increased the
opportunities for constructive collaboration between citizens and the state to
improve basic public services in pilot areas. Even though woredas must operate
under federal guidelines, they still exercise a significant amount of discretion that
can affect the quality of life and services. More than 84 percent of those surveyed
in pilot areas responded positively to social accountability initiatives, which had
increased citizens’ awareness of their rights, responsibilities, and entitlements to
basic services. After service providers and users drew up joint service improve-
ment plans, basic services improved, and so did the quality of the engagement
between citizens and service providers. Through the financial transparency and
accountability component of the PBS Program, citizens have become more aware
of the government budgeting process, and they are advocating more effectively
for their rights as a result. The PBS Program has also improved the efficiency of
resource use by improving financial management and procurement capacity at
the woreda level.
Grievance redress mechanisms are another means of ensuring that citizens’
voices are heard with respect to government services. A grievance redress mech-
anism provides the opportunity for an impartial third party to review a transac-
tion that has taken place between the government and a citizen or a group of
citizens. Through dialogue and technical and financial support, the PBS Program
is strengthening the Ethiopian Institution of the Ombudsman and the regional
Grievance Handling Offices, which offer these services.
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Addressing Equity Issues in Providing Basic Services
Overall, the benefits of PBS-financed spending at the woreda level on health,
education, and agriculture accrued to all income levels. Woreda-level spending on
health and education is particularly pro-poor: 58 percent goes to the two bottom
wealth quintiles.3 In agriculture, woreda-level spending (primarily for agricul-
tural extension workers) drives increases in output and the adoption of new,
improved methods across all asset quintiles, although the magnitude was smaller
for the bottom quintile, perhaps because of a lack of financing to purchase pro-
ductivity-enhancing inputs.
Spending on basic services also appears to be reaching females, especially
spending on health and education. In fact, health spending is undeniably pro-
female, given that much of it promotes women’s access to services that have a
strong impact on reducing maternal mortality—including contraception, ante-
natal care, and assisted deliveries. Education is the only sector for which
expenditure can be associated with data on results, disaggregated by gender,
albeit for only two indicators—net enrollment rate and net intake rate at the
primary level. The coefficient for female primary school students is slightly
higher than for males for both net enrollment and intake, although not sig-
nificant. The important finding is that no bias against females was found in
expenditure on education, the sector that receives the bulk of PBS Program
funds.
The results on agriculture tell a somewhat different and less clear story.
Eighty-seven percent of Ethiopia’s farmers are male, and access to extension
services was found to favor males. It is not certain whether this bias is driven by
gender differences in crop choices, the quality of land farmed by men compared
to women, or some other inherent gender bias. Further analysis is required to
clarify these issues and develop policy responses based on the evidence.
A final important question related to equity is whether PBS Program
resources channeled to the woredas are reaching Ethiopia’s historically dis-
advantaged regions and ethnic groups. The answer appears to be that in
terms of basic service expenditure per capita, the current system broadly
favors Ethiopia’s historically disadvantaged regions compared to the histori-
cally dominant ones. More than 50 percent of the woredas in Gambella and
30 percent in Beneshangul-Gemuz—the two most disadvantaged regions of
the country—spend more than 110 percent of the national average on the
basic service sectors. Spending also appears to favor some historically disad-
vantaged ethnic groups, in accordance with constitutional mandates. Five
majority-Anyiwak woredas are noteworthy for receiving the most public
resources of all woredas in the nation. The exception occurs among the
Somali groups. Federal transfers to Somali Region appear to be fine, but the
region transfers a much smaller share to the woredas—49 percent, compared
to the national average of 73 percent (excluding Addis Ababa) over the four
years studied here.4
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Conclusions and Recommendations
Decentralized spending at the woreda level is both effective and pro-poor. The
estimates provided here imply that the returns to this spending are far from
decreasing, which means that Ethiopia has scope to increase spending and speed
its attainment of the MDGs.
The current approach also appears to be helping some of Ethiopia’s histori-
cally disadvantaged areas and ethnic groups to catch up with the rest of the
country. Expenditure to provide basic services at the woreda level is broadly
equal across Ethiopia’s woredas, with the striking exception of a small number of
woredas that are concentrated in the country’s most disadvantaged regions and
receive significantly greater resources. Resource flows are lowest among the more
developed, historically dominant regions.
In contrast to the predictions of some public management theories, the decen-
tralized provision of services in Ethiopia is not increasing regional, ethnic, or
gender inequalities in investment inputs or service outputs. Indeed, the opposite
seems to be true for education and health, where the impact of PBS-financed
IGFT resources was disproportionately high among the bottom two quintiles and
women. In sum, support for decentralized services in Ethiopia appears to be an
effective use of development partners’ resources from both an efficiency and
equity perspective.
The only exception to these findings is agriculture, for which the impact of
PBS-financed IGFT expenditure was smaller for the bottom quintile. In this
instance, a wide array of factors is likely to be at work, not the least of which
could be poor farmers’ inability to pay for productivity-enhancing inputs, land of
poor quality, or water management issues that could not be controlled for in the
analysis (except for rainfall).
Although quantitative evidence is unavailable at present, descriptive evidence
from the first phase of the Ethiopia Social Accountability Program implies that
structured feedback sessions involving citizens and service providers are strength-
ening citizens’ participation in pilot areas. That evidence, together with the
strong guidance emerging from governance and accountability theory, argues for
the continued application of social accountability tools and the development of
policies to sustain their use in the Ethiopian context. This conclusion can be
verified when the impact assessment for the second phase of the Ethiopia Social
Accountability Program becomes available.
The difficulty of conducting subnational empirical work on Ethiopia cannot
be overstated. Creating the database for this study required considerable effort
and improvisation on the part of the research team. The resulting standardized
database of woreda-level expenditures and characteristics, which will be made
public, is a major output of this study. The data will be augmented with new data
collected under the third phase of the PBS Program and used in future research
related to the program. It is hoped that in time this dataset will become a useful
tool for researchers and students elsewhere in Africa and beyond.
xxii Executive Summary
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Notes
1. See, for example, Tiebout (1956), Oates (1972), Besley and Coate (2003), and Faguet
(2000, 2012).
2. The design of the PBS Program is influenced by the accountability triangle between
government, service providers, and citizens (see World Bank 2003 and figure I.1 in the
main text).
3. The Ethiopia section of an ongoing, multicountry study (Woldehanna, Tsehaye, and
Hill, forthcoming) also finds that spending on primary education in Ethiopia (which
is mostly managed by the woredas) is pro-poor—more so than overall spending on
education (33 percent goes to the two bottom wealth quintiles).
4. Although spending at the woreda level in Somali Region appears to be lower than
required to compensate for decades of underinvestment in basic services, the data for
Somali woredas may be understated; some expenditures normally paid by woredas in
other regions are paid regionally due to security and capacity constraints.
xxiiiImproving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
AGSS Agriculture Sample Survey
AIDS acquired immune deficiency syndrome
ANC antenatal care
CAR contraceptive acceptance rate
CSA Central Statistical Agency
DelSBA deliveries by skilled birth attendants
DHS Demographic and Health Survey
EFY Ethiopia fiscal year
EIO Ethiopian Institution of the Ombudsman
ETB Ethiopian birr
FBG Federal Block Grant
FTA financial transparency and accountability
GDP gross domestic product
HEW health extension worker
HIV human immunodeficiency virus
IDA International Development Association
IGFT intergovernmental fiscal transfer
MDG Millennium Development Goal
NER net enrollment rate
NIR net intake rate
PBS Promoting Basic Services (formerly, Protection of Basic Services)
Program
PTR pupil-teacher ratio
SNNP Southern Nations, Nationalities, and Peoples (Region)
WASH Water, Sanitation, and Hygiene
WBG Woreda Block Grant
Abbreviations
1Improving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
Introduction and Background
Among Ethiopia’s recent impressive development results, its rapid improvement
in basic service delivery indicators is outstanding. The Overseas Development
Institute reports that Ethiopia has moved faster toward the Millennium
Development Goals (MDGs) than all but two other developing countries (ODI
2010). According to the latest Ethiopia Demographic and Health Survey (DHS)
data, child mortality fell from 123 per thousand in 2005 to 88 in 2010, and the
primary net enrollment rate rose from 68 percent in 2004/05 to 82 percent in
2009/10.
Progress in delivering basic services over the past 10 years has been coupled
with impressive economic growth: Gross development product (GDP) grew by
11 percent per annum on average between 2004/05 and 2009/10, according to
official estimates. Initially led by agriculture, growth has become more broad
based, with rising contributions from the mining, services, and manufacturing
sectors. Ethiopia’s growth may have slowed more recently, but it remains among
the highest of any country in the world. The share of the population living in
absolute poverty is declining as well: It fell from 38.7 percent in 2004/05 to 29.6
percent in 2011, according to official data.
All of these results spring from a long-term, concerted government commit-
ment to pro-poor development. Building on the Sustainable Development and
Poverty Reduction Program 2002–04/05 and the Plan for Accelerated and
Sustained Development to End Poverty 2005–10, the government’s current
development plan, the Growth and Transformation Plan, aims to achieve the
MDGs by 2015 and middle-income status for Ethiopia by 2020–23. Ethiopia
achieved the MDG-4 (Child Mortality) target in 2014, ahead of schedule, and
appears to be on track to reach the other MDGs by 2015, according to United
Nations progress reports.
Under its constitution and legal framework, the government is committed to
maintaining the integrity and capacity of the nation’s decentralized administra-
tions down to the woreda level.1 Within Ethiopia’s federal structure, the central
government provides unearmarked block grants through regional governments,
2 Introduction and Background
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which in turn provide block grants to woreda administrations to deliver services to citizens.
This administrative and financial structure has provided timely, predictable financing to sup-
port a steady and impressive increase in basic services throughout the country. But has
Ethiopia’s decentralized approach to delivering basic services been cost effective?
For decades, analysts have debated whether decentralization can make government more
responsive to diverse local needs and more efficient in providing public goods.2 The job of
providing basic services generally falls to local governments, so building their capacity is an
important part of improving basic services. For shared growth and development to occur, it
is vital that such services reach the poorest 40 percent of the population. Ethiopia’s fiscal
architecture makes it a rich, promising empirical setting for investigating the effectiveness
of decentralization as a tool for improving both the quality and distribution of public sector
outputs. The evidence that Ethiopia can offer is especially welcome because so much of the
empirical evidence that has accumulated on decentralization over the past four decades has
been inconclusive.
Consider the evidence from the broadest empirical surveys. Rondinelli, Cheema, and Nellis
(1983) note that decentralization has usually disappointed its advocates. Most developing
countries have encountered serious administrative problems in implementing decentraliza-
tion. The few comprehensive evaluations that have been conducted of the costs and benefits
of decentralization report limited success in some countries but none in others. A decade and
a half later, surveys by Piriou-Sall (1998), Manor (1999), and Smoke (2001) were slightly
more positive but contained caveats about the strength of the evidence in favor of decentral-
ization. Manor notes that the evidence, though extensive, is incomplete, but concludes that
“while decentralization…is no panacea, it has many virtues and is worth pursuing.” Smoke, by
contrast, finds the evidence mixed and anecdotal, and asks whether there is any empirical
justification for pursuing decentralization. Given the sheer size of the literature, the lack of
progress toward an overarching conclusion is surprising.
It is worth noting that more recent empirical studies, which are often technically more
sophisticated thanks to the enormous improvement in data from developing countries over
recent decades, are generally more positive about decentralization’s potential. At least five
recent studies address the link between decentralization and substantive outcomes directly
and with rigorous quantitative evidence. Escaleras and Register (2012) find that fiscal
decentralization is associated with lower natural disaster death rates, implying more effec-
tive preparation and/or responses to natural disasters by countries with decentralized gov-
ernments. Clark (2009) applies regression discontinuity to a natural experiment from Great
Britain and concludes that schools opting out of the centralized education regime—in effect
decentralizing themselves—enjoy large increases in student achievement. Galiani, Gertler,
and Schargrodsky (2008) find that moving the control of schools from central to provincial
governments in Argentina had a positive impact on students’ test scores. The poorest, how-
ever, did not gain from decentralization and indeed may have lost. Barankay and Lockwood
(2007) report that greater decentralization of education to Swiss cantons is associated with
higher educational attainment, especially for boys. By adding empirical evidence from
Ethiopia, a low-income country where large programs in decentralization and public invest-
ment are yielding potentially significant results, this study makes an important contribution
to the literature.
Introduction and Background 3
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Context and Structure of This Book
This book is based on a report issued as part of a programmatic knowledge series for Ethiopia
on improving services for the poorest citizens.3 Future reports will elucidate the findings pre-
sented here in several ways. For example, they will present the results of additional studies of
the quality of service delivery in health and education, drawing on data from ongoing surveys;
offer a detailed assessment of the impact of the Promoting Basic Services (PBS) Program,
based on multiround surveys over the next three years; and assess the impact of the social
accountability component of PBS (the baseline survey is complete, and a full report is due in
two years). The findings reported here will be updated next year, when results from the mini
Demographic and Health Survey (DHS) are available, but they are being issued now to pro-
vide input into the government’s next Growth and Transformation Plan.
This book begins by describing the PBS Program and detailing how intergovernmental fiscal
transfers (IGFTs) are channeled through Ethiopia’s decentralized federal structure to support
the provision of basic services. The sections that follow focus on the approach used for the
analysis, along with the governance and accountability mechanisms that are integral to the
PBS Program. Findings on the effectiveness of local spending (IGFTs) for achieving develop-
ment results in education, health, and agriculture are reported in detail. Subsequent sections
examine the equity impacts of the PBS Program with respect to income, gender, and histori-
cally disadvantaged regions and ethnic groups. The book concludes with a summary of the
results and a series of recommendations. Four appendixes provide additional details on the
methodology and context for the study.
The Promoting Basic Services Program
Through the PBS Program, the Government of Ethiopia and development partners cofinance
block grants to support the provision of basic services at the local level (the government’s
share of the financing is larger and rising). The block grants are distributed from the federal
government to the regional governments using a formula that adjusts for the size of the popu-
lation in each region and for need, based on the current level of development and historic lack
of access to services. The funds are transmitted from the regions to the woredas using regional
formulas based on similar criteria.
Aside from providing block grants to woredas, the PBS Program supports various measures
designed to improve the quality of basic services and local governments’ capacity to manage
them. The program’s design is influenced by the concept of the “accountability triangle”
between policy makers, citizens, and service providers, described in the World Development
Report 2004: Making Services Work for Poor People (figure I.1). The program’s design recog-
nizes that the long “indirect route” of accountability, in which citizens appeal to policy makers
(government) to hold service providers to account, must be complemented by a shorter
“direct route,” in which citizens can directly hold service providers accountable for results.
In Ethiopia, the indirect route of accountability works well precisely because of decentral-
ization (box I.1). Service providers are strictly accountable to local governments for producing
results, but, in turn, the local authorities are held accountable by the regional and federal
governments for delivering basic services and reaching the delivery targets set in the Growth
and Transformation Plan. The teachers, health workers, and agricultural extension workers
4 Introduction and Background
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Figure I.1 The Triangle of Accountability in Service Delivery
Policy makers
ProvidersPoor people
More Choice and Participation
Stronger Voice Stronger Compact
Source: World Bank 2003.
who deliver those services are recruited and managed by the woreda leadership.
Local competition for these leadership positions is significant, and officeholders
are keen to reach their service delivery targets. This arrangement encourages
local authorities to listen to citizens and take responsibility for results. On the
other hand, the direct route of accountability is reinforced by measures that
strengthen financial transparency and accountability (educating citizens on local
budgets and service delivery goals), social accountability (improving citizens’
opportunities to provide feedback directly to local administrators and service
providers), and impartial procedures to redress grievances (instituting the inde-
pendent Ethiopian Institution of the Ombudsman, for example).
Recognizing the critical role of good information to improve development
outcomes, the PBS Program also finances a range of surveys and other data col-
lection and management efforts. Capacity building includes training in financial
management and procurement for local woredas, in addition to other types of
training, based on demand.
Woreda-level block grants primarily support locally recruited staff in five
decentralized sectors (education, health, agriculture, water and sanitation, and
rural roads). With some minor exceptions, woredas have very little revenue of
their own, and they receive no other regular and predictable transfers that can be
used to support staff. For that reason, total woreda spending in sectors relevant
to the PBS Program is used here as a proxy for the block grants cofinanced by
PBS partners and the government. Health sector spending focuses on health
extension workers (HEWs), education spending on teachers, agriculture spend-
ing on agricultural extension workers (also referred to as development agents),
water sector spending on recurrent costs for water systems, and road spending on
road maintenance staff. In health, education, and agriculture there is a one-to-one
correlation between woreda-level block grant spending and HEWs, teachers, and
agricultural extension workers.
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Box I.1 The Indirect Route of Accountability Through Policy Makers to Service
Providers
In Ethiopia’s strong push to achieve middle-income status by the mid-2020s, the federal, re-
gional, and woreda governments all assign high priority to attaining development results
quickly, especially in the basic service sectors. The Ethiopian state has high expectations of
performance from civil service staff at the decentralized levels of government. These indi-
viduals, who are responsible for moving their communities toward specific development out-
comes, are at the heart of the relationship between policy makers and service providers.
Policymakers operating at the local level are held accountable to their higher-ups, and the
Ethiopian government expects officials at every level to deliver results. The accountability
between policy makers and service providers is one of the three sides of the “accountability
triangle” depicted in the World Development Report 2004. Policy makers have some degree of
control over providers’ results, and well-intentioned policy makers can put into place the ap-
propriate mechanisms and incentives to drive positive outcomes.
Two elements of Ethiopia’s system influence the degree of accountability and deserve
note. First, decentralization has created woreda offices that are positions of inherent prestige,
conferring a certain level of power and influence in the community. To some extent, competi-
tion for these desirable positions leads local authorities to feel responsible for results and to
remain open to feedback from citizens. Second, the relationship between local policy makers,
service providers, and the community is strengthened by recruiting individuals locally: Teach-
ers, health workers, and other local residents hired to provide services are apt to feel an intrin-
sic motivation to serve their community.
According the World Development Report 2004, “a critical element in the policymaker-pro-
vider relationship is information.” A woreda’s improvements in the enrollment rate or the pro-
vision of antenatal care, for example, create an impression of the relative success or failure of
the woreda’s officials. Similarly, knowledge of provider absenteeism enables woreda officials
to hold specific service providers to account. The financial transparency and social account-
ability components of the PBS Program, as well as efforts to strengthen monitoring, evalua-
tion, and related reporting from each sector, are providing additional opportunities to im-
prove the accountability of service providers.
The PBS Program is the primary means by which the World Bank and other
development partners assist Ethiopia to achieve the MDGs. At the program’s
inception in 2006, Ethiopia had just started to register noticeable improvements
in human development indicators, albeit from low absolute levels. The Project
Appraisal Document for the first phase of PBS clearly stated the challenge of
maintaining that nascent progress in the face of political and economic uncer-
tainty: “These gains represent the first steps on a steep development trajectory that
Ethiopia will need to sustain if it is to have a chance to meet any of the MDGs”
(World Bank 2012a). Eight years on, it is obvious that through the PBS Program,
Ethiopia is meeting that challenge, and more. The current five-year third phase of
PBS costs US$6.4 billion, of which about half is financed by the government.
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Table I.1 shows the evolution of Federal Block Grants (FBGs) provided to the regions by
the federal government between 2005/06 and 2012/13; Table I.2 shows the evolution of
Woreda Block Grants (WBGs) provided by the regions to the woredas.
While helping to achieve many of the eight MDGs, the PBS Program focuses principally
on three—achieving universal primary school education (Goal 2), reducing child mortality
(Goal 4), and improving maternal health (Goal 5)—and also has a direct impact on the eradi-
cation of extreme poverty and hunger (Goal 1) and the promotion of gender equality
(Goal 3). The program takes advantage of Ethiopia’s well-developed system of fiscal decen-
tralization, which was well under way when the program began, to channel resources to the
Table I.1 Federal Block Grants and PBS Program Disbursements
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
Federal Block
Grants (FBGs)
to the regions
(ETB million) 7,071.5 9,365.0 13,532.5 16,554.8 19,555.7 25,555.8 30,576.4 35,555.3
Federal govern-
ment expendi-
tures (Treasury
source only)
(ETB million) 21,856.5 26,976.2 34,717.4 41,053.8 53,063.7 67,769.6 83,470.2 89,064.2
FBGs as a share
of federal
government
expenditures 32.4 34.7 39.0 40.3 36.9 37.7 36.6 39.9
PBS donors’ contri-
bution to FBGs
(US$ million) 91.0 446.7 477.9 437.2 453.9 542.6 329.5 444.5
Average exchange
rate (ETB/US$) 8.6810 8.7943 9.2441 10.4205 12.8909 16.1081 17.7686 18.1947
PBS donors’ contri-
bution to FBGs
(ETB million) 790.0 3,928.8 4,417.7 4,556.3 5,851.7 8,741.0 5,855.1 8,087.4
PBS donors’
contribution
to FBGs (%) 11.2 42.0 32.6 27.5 29.9 34.2 19.1 22.7
IDA’s contribution
to FBGs (%) 11.2 9.4 12.4 14.7 14.8 12.9 12.1 9.5
FBGs as a share
of total regional
expenditures 76.2 88.5 85.3 86.2 79.8 80.4 62.8 54.4
Source: Ministry of Finance and Economic Development for the data on FBGs and federal government expenditures, PBS donors for data
on PBS disbursements, and National Bank of Ethiopia for exchange rate data.
Note: ETB = Ethiopian birr; IDA = International Development Association; PBS = Promoting Basic Services.
Introduction and Background 7
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Table I.2 Total Woreda Recurrent Expenditures by Region
ETB million
Region 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
Tigray 457.3 556.9 797.6 941.9 1,040.0 1,426.7 1,837.8 2,265.0
Afar 126.9 119.2 191.2 247.9 278.3 371.3 405.5 481.4
Amhara 1,385.4 1,363.1 2,160.2 2,956.2 3,136.5 3,787.2 5,522.7 6,429.4
Oromia 2,056.7 2,109.8 3,070.7 4,312.9 4,401.9 5,866.5 6,957.0 8,887.9
Somali 217.8 232.0 367.2 282.0 459.3 626.9 972.3 1,123.0
Beneshangul-
Gemuz 100.3 124.1 148.2 167.1 216.7 293.1 452.7 488.7
SNNP 1,250.4 1,539.2 1,910.1 2,097.9 3,012.6 3,950.5 5,161.1 6,279.5
Gambella 69.4 84.2 127.8 140.1 151.3 202.1 286.9 351.0
Harari 0.0 24.2 24.2 33.9 38.3 48.8 60.1 73.7
Dire Dawa 0.0 14.4 27.8 28.3 31.7 31.8 41.4 52.2
Addis Ababa 507.2 534.9 656.9 1,187.0 1,178.9 1,447.3 1,922.9 2,581.0
All regions 6,171.3 6,702.2 9,481.8 12,395.1 13,945.3 18,052.0 23,620.3 29,012.9
All regions
(excluding
Addis Ababa) 5,664.1 6,167.3 8,825.0 11,208.1 12,766.5 16,604.8 21,697.4 26,431.8
Source: World Bank based on Ministry of Finance and Economic Development data.
woreda level to finance recurrent expenditures and efficiently deliver and
expand services in the five sectors mentioned earlier. At the local level, this fund-
ing is used to deploy frontline development workers and in this sense is linked to
meeting MDG targets. HEWs, for example, promote preventive behaviors and
provide basic health interventions, such as vaccinations and family planning
information, which serve to reduce child mortality and improve maternal health.
The hiring of additional teachers is related directly to increasing net enrollment
rates in order to achieve universal primary education. Funds transferred to the
woredas in the first two phases of the PBS Program helped to hire more than
100,000 new primary school teachers, 38,000 HEWs, and 45,000 agricultural
extension agents, dramatically expanding access to their respective services.
Despite the impressive scale of the PBS Program, prior to this study no
empirical analysis was done to assess the effects of PBS spending on outcomes,
partly because of the difficulty of obtaining data on local expenditures and out-
comes over time. One of this study’s signal accomplishments is that it has com-
piled comprehensive expenditure data through time and consolidated it into a
database with output indicators for health and education for the same time
period—a prerequisite for the analysis that follows.
8 Introduction and Background
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Notes
1. Appendix C briefly describes the evolution of the modern Ethiopian Federal State.
2. See, for example, Tiebout (1956), Oates (1972), Besley and Coate (2003), and Faguet
(2000, 2012).
3. World Bank (2014). This programmatic knowledge series complements another pro-
grammatic knowledge series in Ethiopia, led by the Poverty Reduction Economic
Management network, which will include a poverty assessment, public expenditure
reviews, and various reports on growth and employment.
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A primary objective of this study is to assess the relationship between expendi-
ture at the woreda level to provide basic services in five sectors and key outputs
and outcomes for those sectors, focusing particularly on health, education, and
agriculture (for which the best data are available).1 As noted, woreda-level
spending in those three sectors is associated strongly with key service outputs,
such as numbers of teachers, health extension workers (HEWs), and agricultural
extension workers.
This study focuses on such outcomes as the net enrollment rate, rates of vac-
cination and contraceptive use, and agricultural yields of a variety of crops (see
figure 1.1 for a diagrammatic representation of the Promoting Basic Services
[PBS] results chain). An important consideration is that the link between
CHAPTER 1
Conceptual Framework
and Methodology
Figure 1.1 Conceptual Model of the Results Chain of PBS Spending
Spending for salar-
ies of teachers and
health/agricultural
extension workers
Teachers and
health/agricultural
extension workers
hired
Direct impact:
• Net enrollment ratio
• Pupil-teacher ratio
Catalytic impact:
• Number of children
vaccinated
• Women receiving
antenatal care
• Number of people using
contraception
• Yield from agricultural crops
• Gains in literacy
• Increased life expectancy
• Lower infant mortality
• Increased agricultural
income
InputsDeliveryOutputsOutcomes
10 Conceptual Framework and Methodology
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spending on staff and results cannot be one to one; service availability and use
need to be assessed as well. Unfortunately such data are not available for the
most part, with the very limited exception of the health sector, where
Demographic and Health Survey (DHS) data show that the use of health ser-
vices, especially by the poor, is catalyzed by HEWs (Wang et al., forthcoming).
Other caveats concern the quality of the data and local effects of spending out-
side the PBS Program (box 1.1).
A parallel objective of this study is to assess the incidence of local expendi-
tures by wealth quintile, in line with the World Bank’s objective of achieving
shared growth by targeting the bottom 40 percent. Another objective is to inves-
tigate the allocation of block grants at the woreda level in relation to Ethiopia’s
constitutional objective of providing additional resources to historically under-
served ethnic groups. A final objective, related to the triangle of accountability
shown in figure I.1, is to assess the components of the PBS Program that are
designed to strengthen citizen voice in improving basic services.
This study makes use of a database comprising woreda-level recurrent expen-
ditures and information on outcomes for a variety of health and education indi-
cators at the woreda level between 2008 and 2011. These data are complement-
ed by Agriculture Sample Survey (AGSS) data and information from the 2007
census on the demographic characteristics of each woreda, including its overall
Box 1.1 Some Caveats on Interpreting the Results of This Study
Please note that while the results reported in the text are for log-linear regressions, we also
estimated quadratic and linear regressions in addition to probits. The detailed results are in
appendix D.
Clearly, the local development results achieved in the sectors studied here are affected by
spending from other levels of government, such as capital spending and nonsalary recurrent
costs. Examples include the cost of learning materials (financed separately in education) and
the costs of facilities above the health center level (financed separately in health). PBS Pro-
gram spending in agriculture and roads includes only spending on extension workers and
road maintenance staff. In other words, it is important to keep in mind that the results pre-
sented here for PBS spending—in health, for example—show the catalytic effect of health
extension workers; the contributions of capital spending, spending on medicines, and other
types of expenditures are taken as given. To cite another example, the results of PBS spend-
ing in agriculture would not be possible without the contribution of other spending, public
and private, and reflect only the catalytic effects of agricultural extension workers.
Another important caveat is that, as always, the results presented here are subject to the
quality of the data used in the analysis. The management information systems for health and
especially education are fairly reliable and improving (not least through PBS support), al-
though much room for improvement remains. Fortunately, the results for health and educa-
tion can be confirmed by national-level analysis of DHS data. The analysis for agriculture uses
Agriculture Sample Survey data, which are also considered reliable.
Conceptual Framework and Methodology 11
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population, ethnic composition, the percentage of the population that is rural
and urban, and other variables. Econometric modeling is used to assess the asso-
ciation of increased local spending with the expansion of basic services and out-
comes, and by extension the efficiency of the PBS Program in meeting its devel-
opment objective. The study also verifies the woreda-level findings in health and
education using the household data from DHS 2005 and 2011, including the use
of limited dependent variable (primarily probit) regressions to predict the impact
on household behavior of interactions with HEWs.
Cross-time pooled regressions with the log of the outcome variable of interest
on the left-hand side were run to evaluate the result of the log per capita sector
expenditure, controlling for shares of rural/urban population and ethnicity (which
constitute a good proxy for historical lags in development). A variable for time
was included to isolate the time-series effects from other effects. The main text
presents results from the log-linear regressions, which are preferred because they
eliminate the effects of extreme values and allow for declining returns to scale.
Linear regressions and quadratic regressions were also estimated (see appendix A).
The indicators evaluated are drawn mostly from the PBS Results Framework.
No reliable data on outcomes at the woreda level were available for agriculture,
water supply, and roads, so alternative approaches were used. For agriculture,
zonal data on outcomes were available to assess the effectiveness of spending on
agriculture, taking the average per capita woreda spending on agriculture as a
proxy for services offered by agricultural extension workers. More severe data
constraints for water supply and roads made it necessary to resort to desk reviews.2
Conducting subnational empirical work on Ethiopia involves numerous chal-
lenges and constraints. Relatively little data is collected, the data are often of
poor quality, and few attempts are made to systematize the results into any
obviously comparable framework. A few illustrations are telling. Until very
recently, fiscal data on subnational expenditures in health, education, agricul-
ture, water, and roads were available only for Ethiopia Fiscal Year (EFY) 2003.
Their geographic identifying codes and names do not match those used for
census data, in which geographic codes and names vary in unpredictable but
pervasive ways from fiscal data. The last census counted some 740 woredas,
zones, and regions, but the fiscal dataset includes more than 850. Consolidating
these two sources yielded a dataset of 989 subnational units, 250 more than in
the census.
The analysis consists of three key stages. Stage I follows the approach of
Faguet (2012) and Faguet and Sánchez (2013), examining the relationship
between woreda-level spending in each sector (figure 1.2) and results in those
sectors. Ideally first differences would be used on the outcome left-hand-side
variables, but the few years of data currently available make this procedure
impractical. Instead, trends are estimated by placing levels on the left-hand side.
Stage II is an incidence analysis of woreda-level spending by quintile, using the
wealth quintile breakdown from the DHS survey. Improvements in health and
education outcomes are allocated to each quintile by pro-rating the expenditure
increases to each quintile by the improvement in outcomes achieved for that
12 Conceptual Framework and Methodology
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quintile, controlling for the average improvement for all groups.3 The results
indicator for education was the net enrollment rate, which is directly affected by
the number of teachers recruited for the woreda. For health, the results indicator
is an average of four indicators that are affected directly by locally recruited
HEWs: increased use of contraception, increased rates of immunization,
increased use of antenatal care, and increased use of skilled birth attendants.
In stage III, limited dependent variable regressions are used to examine the
link between woreda expenditure and sectoral results for different wealth quin-
tiles4 to estimate probabilities that households will act in a certain manner. This
three-stage analysis was limited to sectors with reliable data on woreda-level
results and corresponding household survey data on health and education.
For education, the third-stage test was considered unnecessary because of the
direct linkage between woreda-level spending, which is mostly for teachers, and
the net enrollment rate. The third-stage test was needed for health, however,
because the linkage between spending on HEWs and results is less direct. In that
case, the link between contact with HEWs and health sector outcomes was
tested using DHS data.
Given that no output data were available for agriculture at the woreda level,
the effect of agricultural extension services was analyzed by plot-size quintile. No
national or local analysis could be done for water supply; a recent national census
found that the data were unreliable, and in any event the sector accounts for only
2 percent of woreda-level expenditure. Nor was in-depth analysis possible for
roads (which account for only 1 percent of woreda-level expenditure).
Figure 1.2 Woreda-Level Expenditure in the Five PBS Sectors, 2011
Roads
expenditure
1%
Water
expenditure
2%
Health
expenditure
17%
Agriculture
expenditur
e
18%
Education
expenditur
e
62%
Source: World Bank calculations using data collected from regional and Woreda bureaus of
the Ministry of Finance and Economic Development.
Conceptual Framework and Methodology 13
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Notes
1. Note that this study does not look at the quality or effectiveness of service delivery,
however. Phase three of the PBS Program supports the collection of data on service
delivery indicators for health and education, which will be used in future studies of
those issues.
2. Normally, DHS has good water supply data, but definitional changes between the two
rounds of DHS in Ethiopia have made the water supply data incompatible.
3. This methodology was adopted because there were no data on direct use of different
services by quintile. This approach assumes a link between woreda-recruited staff and
results.
4. Education and health quintiles were based on DHS quintiles. Quintile estimates for
agriculture used land-size quintiles.
15Improving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
Before discussing the effectiveness and equity analyses of woreda-level spending
to provide basic services, it is important to document how the context of
accountability is changing in Ethiopia with respect to service provision.
Mechanisms that enhance financial transparency, increase social accountability,
and permit grievances to be addressed all strengthen citizens’ capacity to share
their concerns effectively with service providers and local authorities (box 2.1).
Note that one element of direct accountability that is not common in Ethiopia
outside larger urban centers is the market for basic services, because private pro-
viders are concentrated in major centers.
CHAPTER 2
Citizen Direct Voice and Accountability
Box 2.1 The Direct Route of Accountability—Citizen Direct Voice
and Accountability Models in Ethiopia
Decentralization brings service providers under the control of local governments and their
constituents.a Staffing levels and allocations are centrally approved, but personnel are locally
hired and managed—and in theory more directly accountable to the community. For ac-
countability to occur, however, local residents must be able to understand the issues sur-
rounding service delivery and the options for voicing their concerns. The Promoting Basic
Services (PBS) Program is testing and in some cases scaling up complementary strategies to
strengthen citizens’ voice and access to information.
For example, the project’s financial transparency and accountability component
makes information about local government budgets and spending publicly available in a
simple, clear format. Through budget literacy training, citizens learn how to provide feedback
to local authorities on budgets and the provision of basic services.
The project’s social accountability component uses structured social accountability
tools such as community score cards, citizen report cards, participatory budgeting, and inter-
face (direct) meetings between service providers and service users to make services better,
more accessible, and more effective. These tools are being used in more than 340 woredas by
about 4.5 million service users. A rigorous, independent evaluation based on a randomized
box continues next page
16 Citizen Direct Voice and Accountability
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Decentralization and the Quality and Appropriateness
of Local Services
Until woreda-level data from the period before decentralization are available, it
will not be possible to estimate the effects of decentralization per se (in the sense
of the transfer of expenditure and decision-making authority from upper to
lower tiers of government) on financial flows, service provision, or substantive
outcomes. These are the questions on which the decentralization literature typi-
cally focuses, and when data permit, they will be addressed in future reports.
Other, more micro-level questions can be examined with the data assembled
for this study, however. They concern the effects of woreda-level discretion and
decision making on the quality of services and their appropriateness to local
conditions. These questions are distinct from “big discretion” issues, such as how
to divide resources between investment and expenditure, or how to allocate
spending between schools, hospitals, and roads. “Small discretion” questions con-
cern such issues as how to target a vaccination campaign, or when and exactly
how to maintain a road, or which side of a road or stream is the best location for
a new school. Decisions of this kind, which can increase the efficiency and reduce
the cost of public services by tailoring services to highly specific local conditions
and needs, are the bread and butter of local governments.
Small discretion has other important effects on service delivery. Centrally
established staffing norms determine the local funding available for particular
sectors, but the actual hiring of staff occurs at the woreda level. Local hiring can
influence the attendance of teachers, health extension workers (HEWs), and
agricultural extension workers, because the hiring and paying authority is present
in the immediate area where they work. Absenteeism is near 50 percent in many
Box 2.1 The Direct Route of Accountability—Citizen Direct Voice and Accountability
Models in Ethiopia (continued)
controlled trial is under way to examine the impact of these tools and determine whether
they should be made available nationally.
The project also plans to strengthen and expand the use of grievance redress mecha-
nisms. A grievance redress mechanism provides the opportunity for an impartial third party
to review a transaction that has taken place between the government and a citizen or a group
of citizens, who assert that a government service or benefit has been denied, or some other
harm has occurred. The Ethiopian Institution of the Ombudsman (EIO) and the regional Griev-
ance Handling Offices offer these services. The EIO is an independent entity that has six re-
gional branches and is accountable to the Federal Parliament. Grievance Handling Offices,
established in all nine regional states, examine the validity of citizens’ grievances and find
ways to rectify them. They are accountable to the respective chief administrator in their re-
gional state and receive technical support and capacity building from the EIO.
a. See Faguet (2004) for an in-depth discussion of the theory surrounding this topic, and Faguet and Wietzke (2006)
for practical applications.
Citizen Direct Voice and Accountability 17
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countries that centrally recruit and deploy teachers. The limited evidence avail-
able for Ethiopia shows that teacher absenteeism is about 15 percent.1 The same
study finds that only 10.4 percent of respondents said that health staff were
frequently absent, including the HEWs who serve the immediate community.
Nearly all respondents (96 percent) reported that agricultural extension workers
were present in their kebele (subdistrict), and 95 percent found them to be use-
ful. This is the effect of small discretion. More services are delivered because
more service providers are on the job, and if they are not, evidence indicates that
a significant percentage of citizens will complain to their local government about
it (Kamurase and Alibhai 2014). In sum, the limited data show that decentraliza-
tion increases accountability, and that even if a small number of citizens make
their voices heard, they can have a positive effect on the quality of service
delivery.
Ethiopia’s decentralization law also allows citizens from different ethnic or
language groups to request their own woreda and education in their own lan-
guage. Such actions appear bound to introduce a greater measure of local
accountability and increase learning effectiveness.
Financial Transparency and Accountability
Over the last five years, financial transparency and accountability (FTA) tools
designed under the PBS Program have been rolled out to disclose information on
regional and local budgets, service delivery targets, and accomplishments. More
than 90 percent of Ethiopia’s woredas and city administrations now post such
information publicly. Aside from posting information, regions also use radio and
television programs, brochures, t-shirts, and other means to disseminate informa-
tion. These actions have revolutionized transparency, as this key information was
not released to the public before 2006.
The increase in transparency has not been even across the country. A recent
survey (Selam Development Consultants 2013, 34–35) finds that 42.5 percent
of respondents have seen FTA templates posted in their jurisdictions. It is encour-
aging that citizens are not merely passively receiving this information but are
responding to it. More than 230,000 citizens across all woredas and city admin-
istrations have received budget literacy training to improve their understanding
of the budget process and service delivery issues. As a result, over time more citi-
zens are discussing budget and spending priorities with their local officials, pro-
viding feedback on budget execution, and monitoring project implementation.
The survey mentioned earlier finds that 37 percent of respondents have dis-
cussed budget information with their woreda or city officials. Another 26 percent
have discussed the information with other citizens. Nor is this communication
one sided. Some 37 percent of survey respondents indicated that woreda and city
officials had sought citizens’ views on budgetary issues, and 43 percent revealed
that officials had also sought citizens’ views on the quality of public services. (See
appendix B for more detail.)
18 Citizen Direct Voice and Accountability
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Social Accountability
The social accountability component of the PBS Program complements FTA
initiatives by supporting civil society organizations and other means for citizens
to provide feedback to local administrators and service providers.2 In an earlier
phase of PBS, 86 woredas tested tools such as community score cards, citizen
report cards, and participatory budgeting. They also promoted interface meetings
between citizens and local authorities to provide feedback on service delivery.
Following a positive evaluation of those pilot efforts, the current phase of PBS
features an expanded social accountability component.3 The evaluation finds that
more than 84 percent of the individuals surveyed in pilot areas responded posi-
tively to social accountability initiatives, which had increased citizens’ awareness
of their rights, responsibilities, and entitlements to basic services. After service
providers and users drew up joint service improvement plans, basic services
improved, and so did the quality of the engagement between citizens and service
providers. These findings bear out the prediction of the model shown in figure I.1.
During the current phase of the PBS Program, participating woredas are con-
tinuing to use the tools piloted in the first phase. Interface meetings between
users and providers of services, along with woreda and kebele officials, continue
as well, in addition to the development of agreed joint action plans monitored by
joint committees of service users and providers. In 224 woredas, 49 Social
Accountability Implementing Partners are working to assist public service pro-
viders to deliver better-quality services in education, health, agriculture, water
and sanitation, and rural roads, in response to feedback from communities and
citizen groups. Other social accountability tools will be considered carefully,
based on their value added, including participatory planning and budgeting, bud-
get tracking, gender-responsive budgeting, and service charters. (See appendix B
for details.)
The government is exploring strategies to sustain and strengthen these social
accountability initiatives. Initial thoughts on such a policy highlight the need to
strengthen linkages and synergies between social accountability and FTA, evalu-
ate the implementation of recommendations on linkages, and develop more
medium- and long-term options based on those evaluations.
Grievance Redress Mechanisms
A study conducted under the auspices of the PBS Program in 2011 determined
that Ethiopia had established several grievance redress mechanisms in different
regions under various programs (Randolph and Edjeta 2011). The mechanisms
varied significantly in their legal underpinnings, procedures, the government
entity to which they were responsible, accountability, and the finality and
enforcement of grievance findings.
Through dialogue and technical and financial support, the PBS Program aims
to strengthen the Grievance Handling Offices at the regional state level by
improving public awareness of the services they provide, delivering technical
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assistance to develop a common standard of grievance redress procedures, and
developing the capacity of grievance handling officers. The PBS Program also
supports the opening of Grievance Handling Offices in all regional states, as well
as branches of the Ethiopian Institution of the Ombudsman (EIO). Currently
the PBS Program finances capacity building and training workshops conducted
by EIO for regional EIO branch offices and regional grievance handling officers.
It also supports studies to aid in standardizing and improving the grievance
redress system across the country. This important contribution supports and
expands the forums where ordinary citizens can air their concerns.
Notes
1. Based on initial results from a baseline survey conducted for an assessment of the
social accountability component of the PBS Program. Data on absenteeism include
not just absence from school but also absence from the classroom. See Kamurase and
Alibhai (2014).
2. Under PBS, social accountability activities are financed through a programmatic mul-
tidonor trust fund administered by the International Development Association (IDA),
though without IDA resources.
3. IPE Global (2010). The assessment was not a formal evaluation but relied more on
recapitulative data. As mentioned, the new phase of PBS was designed to include a
full, rigorous evaluation, for which a baseline survey has been completed.
21Improving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
A Positive Association between Woreda Block Spending
and Results in Education
Over half of the resources channeled to local governments under the Promoting
Basic Services (PBS) Program are used to hire primary school teachers.1
Demographic and Health Survey (DHS) data indicate that the net enrollment
rate for primary school climbed from 68 percent to 82 percent between 2005
and 2011, and the completion rate rose from 34 to 49 percent. The analysis that
follows sought to determine if there was an association between per capita
expenditures on primary education at the woreda level and the net enrollment
rate (NER) and pupil-teacher ratio (PTR). The third phase of the PBS Program
is expected to achieve specific improvements in both of these education-related
indicators, which are included in the results framework.
The analysis did not consider nonsalary recurrent costs in education, which
are covered by other levels of government.2 The exclusion of those costs is not
expected to affect the results of the analysis to a great extent, given that teacher
costs constitute more than 90 percent of recurrent costs in basic education. The
model does consider the impact of capital costs such as school buildings, how-
ever, which can drive enrollments. Capital expenditure is based on per capita
expenditures at the regional level, where most capital spending occurs. Table 3.1
presents the main coefficients of interest from the log-linear regression analysis.
Both net enrollment rate and pupil-teacher ratio show a strong and significant
relationship with woreda-level per capita recurrent expenditure, after controlling
for the effects of rural/urban percentage and ethnicity. For every additional
Ethiopian birr (ETB) per capita of woreda education spending, net enrollment
rate increases by 0.20 percent. These results are all significant at the 1 percent
level and robust to changes in specification. The results for pupil-teacher ratio
are similar.
CHAPTER 3
Effectiveness of Woreda Block Grant
Spending on Education, Health, and
Agriculture
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A Positive Association between Woreda Block Grant Spending
and Results in Health
About 20 percent of PBS Program resources channeled to the local level are used
in the health sector, mainly to hire frontline health extension workers (HEWs)
(box 3.1). HEWs do not provide extensive curative services; their assignment is to
support public health in several important ways. They promote healthy lifestyle
practices in the community and refer complicated cases, such as difficult pregnan-
cies or severe child malnutrition, to a health center, where they can be treated by
health professionals with more extensive training. They also provide services that
can be scheduled periodically, the most important being immunizations, family
planning (insertion of contraceptive implants), and antenatal care. HEWs also
mobilize pregnant women to seek care from skilled birth attendants—nurses,
Table 3.1 Association of Log of Per Capita Education Expenditure with Log of Education
Outcomes
Independent variable
Dependent
variable/indicator Coefficient/(SE) Significance
Log of expenditure Log of net enrollment
rate
0.2757
(.0280)
***
Log of pupil-teacher
ratio
–0.2229
(.0203)
***
Source: Based on Poverty and Social Impact Analysis Database from 2008 to 2011.
Note: Number of observations is 2,583 for NER and 2,695 for PTR. Standard errors given in parentheses; *** indicates
significance at 1percent level.
Box 3.1 Ethiopia’s Health Extension Program and Health Extension Workers
The Health Extension Program is an innovative, community-based program to deliver health
services. The program’s underlying assumption is that health can be enhanced in communi-
ties by raising awareness, diffusing knowledge through training, and creating model families,
which exemplify sound health practices (completing immunization schedules, for example)
and can share their knowledge and behavior.
The program has infrastructure and human staffing components. Every village with 5,000
residents is supposed to construct a health post and recruit two female health extension
workers (HEWs) from the community. After one year of training in which they learn to imple-
ment 16 health extension packages, these women return to their community as frontline
health care staff. The 16 packages are as follows:
• Disease prevention and control (3):
Human immunodeficiency virus (HIV)/acquired immune deficiency syndrome (AIDS)
and other sexually transmitted infections; tuberculosis prevention and control
Malaria prevention and control
First aid emergency measures
box continues next page
Effectiveness of Woreda Block Grant Spending on Education, Health, and Agriculture 23
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• Family health (5):
Maternal and child health
Family planning
– Immunization
– Nutrition
Adolescent reproductive health
• Health education and communication
• Hygiene and environmental sanitation (7):
Excreta disposal
Solid and liquid waste disposal
Water supply and safety measures
Food hygiene and safety measures
Healthy home environment
Control of insects and rodents
Personal hygiene.
The HEWs’ main task is to increase awareness of disease prevention strategies. They may
also supervise the intake of medication for tuberculosis and antiretroviral treatment for
HIV/AIDS, conduct rapid diagnostic tests for malaria and administer malaria drugs, attend
uncomplicated childbirths, and collect vital statistics; they are not allowed to administer
antibiotics. A critical aspect of their work is to refer patients to nearby health centers as
needed.
The Health Extension Program was piloted in five regions in 2002/03, with encouraging
results. By mid-2008/09, the Federal Ministry of Health had successfully deployed over
30,190 HEWs throughout Ethiopia. Various evaluations have found the Health Extension
Program to have very tangible effects on rural people’s awareness of disease prevention,
family health, hygiene, and environmental sanitation. The program now covers all of the
country.
Box 3.1 Ethiopia’s Health Extension Program and Health Extension Workers (continued)
health officers, trained midwives, or physicians—whose positions are also funded
from the local health budget, although they account for a smaller percentage of
expenditure.
In other low-income countries, decentralized expenditure has been shown to
improve health outcomes (Faguet and Ali 2009). Does this hold in Ethiopia?
Woreda spending on health was analyzed with respect to four health-related
outcomes: the Penta 3 vaccination rate; the percentage of pregnant women who
receive antenatal care (ANC); the contraceptive acceptance rate (CAR); and the
percentage of deliveries by skilled birth attendants (DelSBA). The first two out-
comes are included in the results framework for the third phase of the PBS
Program, while the latter two were included in the framework for the second
phase. Each outcome is directly related to local spending on health. Control
24 Effectiveness of Woreda Block Grant Spending on Education, Health, and Agriculture
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variables included the per capita capital expenditure (at the regional level).3
Table 3.2 presents the results of the log-linear regressions.
Increased health expenditures by woredas appear to improve the rates of
Penta 3 vaccination, antenatal care, contraceptive use, and deliveries by skilled
attendants. All of these results are significant, and all are robust to changes in
specification. As with education, the model for health considers only per capita
woreda-level spending on HEWs and health center staff; it does not consider
nonsalary and capital costs, although clearly they can affect the results presented
here. For example, HEWs can convince mothers to immunize their children, but
the vaccines (financed separately from the health workers) must also be
available.
The indicators included in the model directly reflect the responsibilities of
HEWs, who account for most of the local recurrent health expenditure. HEWs
mobilize the community during immunization campaigns. They are the frontline
providers of antenatal care and the primary spokespersons in the community on the
importance of contraception in family planning. Technically speaking, HEWs are
not skilled birth attendants, but their referrals to those professionals influence the
proportion of women who give birth with the assistance of a skilled attendant.
A smaller percentage of local health expenditure is directed to health centers.
By federal mandate, each of the 3,000 health centers must be staffed by one to
three health officers, depending on the characteristics of the host community.
Each health officer is backed by a team of about four nurses and has at least one
trained midwife. Each of the indicators assessed here can potentially be influ-
enced by HEWs as well as health center staff, but except for deliveries by skilled
Table 3.2 Association of Log of Per Capita Health Expenditure with Health Outcomes
Indicator Coefficient/(SE) Significance
Log of expenditure Log of Penta 3 vaccinations 0.0578
(0.0276)
**
Log of Penta 3 vaccinations on
expenditure lagged one year
0.1116
(.0374)
***
Log of antenatal care 0.0861
(0.0347)
**
Log of contraceptive acceptance
rate
0.0064
(0.0410)
NS
Log of contraceptive acceptance
on expenditure lagged one year
0.1161
(.0491)
***
Log of deliveries by skilled birth
attendants
0.2669
(0.0747)
***
Source: Based on Poverty and Social Impact Analysis Database from 2008 to 2011.
Note: Number of observations is 1,664 for Penta 3, 2,277 for antenatal care, 2,243 for contraceptive acceptance rate,
and 2,154 for deliveries by skilled birth attendants. Standard errors given in parentheses; *** indicates significance at
1 percent level, ** at 5 percent level.
Effectiveness of Woreda Block Grant Spending on Education, Health, and Agriculture 25
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
birth attendants, most of the effects found in the analysis would be expected to
arise from HEWs. Deliveries by skilled attendants would be influenced more
equally by HEWs and health center staff.
A Positive Association between Woreda Block Grant Spending
and Results in Agriculture
Ethiopia relies heavily on agriculture, which accounts for nearly half of gross
domestic product (GDP) and employs around 80 percent of the population.
The PBS Program supports agriculture by financing recurrent costs at the
woreda level, mostly consisting of the costs of employing agricultural extension
workers. Extension workers are trained to teach community members about the
benefits of improved farming techniques, such as the appropriate use of
improved seed and fertilizer, the importance of irrigation and erosion preven-
tion, and other practices. About 20 percent of PBS funds go to the agricultural
sector.
In agriculture, just as in health and education, expenditure levels increased
rapidly between 2008 and 2011. Concomitant with this increase, the percentage
of fields that use extension services has more than doubled. Figure 3.1 shows this
trend for both variables. The agricultural data presented here and used in much
of the analysis in the rest of this section are collected by the Central Statistical
Agency as part of its annual Agriculture Sample Survey (AGSS). This survey
obtains information from around 45,000 households and includes data from
500,000 fields in Ethiopia’s nine regions as well as the city-state of Dire Dawa.
The data are aggregated at the zonal level to be more representative of the
underlying population.
Figure 3.1 Growth in Extension Services and Woredas’ Expenditure on
Agriculture, 2008–11
Average agriculture expenditure per capita
Percent fields using extension services
2008
0
2
4
6
8
10
12
14
0
5
10
15
20
25
30
2009
Year
2010 2011
Percent of fields using extension
services
ETB per capita
Source: World Bank, using AGSS data.
Note: ETB = Ethiopian birr.
26 Effectiveness of Woreda Block Grant Spending on Education, Health, and Agriculture
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Zonal spending on agriculture significantly affects the use of a variety of
improved farming techniques, as seen in the result of cross-time pooled
regressions on AGSS data between 2008 and 2011 (table 3.3). The regres-
sions for agriculture, like those for health and education, control for the per-
centage of the population that is rural and the ethnic composition of the zone.
For each zone, deviation from the average rainfall (1996–2011) in the current
and previous year is included as a predictor. In all regressions where an agri-
cultural variable is included on the left-hand side, both the current year’s as
well as the previous year’s deviation from average rainfall is a significant
predictor.
Although the effects appear to be relatively small, several aspects of
improved farming are significantly and positively associated with zonal per
capita spending on agriculture. For every additional US$1 per capita spent, for
example, the probability that a field in a given zone will benefit from extension
services increases by about 0.2 percent (assuming an exchange rate of ETB 20
to US$1). Coefficients for the use of fertilizer and improved seed are smaller,
but these practices remain positively and significantly associated with spending.
In contrast, irrigation is not associated with higher spending. This result may be
related to the higher capital costs associated with irrigating fields, and it would
therefore depend more on zonal expenditure in the water sector than in
agriculture.
Figure 3.2 shows the overall basket of crops produced by private farmers in
2011 by the amount produced (in quintals). Cereals (including barley, teff,
wheat, sorghum, maize, oats, and rice) make up almost 75 percent of production.
A further 15 percent consists of pulses (such as beans, chickpeas, and lentils) and
root crops (such as potatoes, carrots, and onions). Enset, fruit crops, and coffee,
which can be grown only in certain geographical areas, represent a smaller pro-
portion of overall production.
Table 3.3 Effect on Farmers’ Use of Extension Services of ETB 1 Per Capita Spending on
Agricultural Extension Workers
Indicator Coefficient/(SE) Significance
Field using extension services 0.0008
(0.0004)
**
Field using improved seed 0.0002
(0.0001)
*
Field using fertilizer 0.0007
(0.0003)
**
Source: Based on probit models using cross-time pooled AGSS data from 2008 to 2011.
Note: AGSS data aggregated to the zonal level. Number of observations is 191. Controls include current and previous
years’ deviations from average rainfall (calculated as the average between 1996 and 2011), zonal poverty rate,
percentage of the zone’s population that is rural, and the ethnic groupings used in previous regressions. Standard
errors are given in parentheses; ** indicates significance at 5 percent level, * at 10 percent level.
Effectiveness of Woreda Block Grant Spending on Education, Health, and Agriculture 27
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
Figure 3.2 Production by Crop, 2011
Other 1%
Cereals
72%
Pulses
9%
Root Crops
6%
Vegetables 3%
Oilseeds 3%
Enset 3%
Fruit Crops 2%
Coffee 1%
Source: World Bank estimates, AGSS, 2011.
Note: “Other” includes hops and chat. The figure does not include sugar, which is not often
grown on private land.
The overall objective of spending on agriculture is to increase the productivity
of farmers’ fields (measured by yield, expressed here as the number of quintals
produced per hectare of cultivated land). Cross-time pooled regressions between
2008 and 2011, with the log of yield of a specific category of crop (cereals, pulses,
and so on) as the dependent variable, show strong positive relationships with log
per capita recurrent agricultural spending and crop yields. Once again, control
variables included each zone’s percentage of rural population, overall poverty
rate, the current and past years’ deviation in rainfall from the average, and ethnic
composition (this last variable helps to account for geographical heterogeneity in
crop production).
Of the eight categories of crops grown in Ethiopia, five—cereals, vegetables,
enset, fruit, and coffee, which represent about 85 percent of national agricultural
production—show a positive and significant relationship with agricultural spend-
ing (table 3.4). These results, combined with the positive effect of spending on
agricultural extension services, indicate that PBS Program funds play an impor-
tant role in increasing farmers’ productivity. As discussed, that role should be
viewed as catalytic, because increased productivity also depends on other public
and private spending, as well as investments in infrastructure, which are not
reflected in this analysis.
28 Effectiveness of Woreda Block Grant Spending on Education, Health, and Agriculture
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Notes
1. Secondary education expenditure is split between the woreda and the region, so it was
not included in the analysis.
2. For example, improvements in the quality of education are supported under the
General Education Quality Improvement Project, funded by the Government of
Ethiopia, World Bank, DFID, United States Agency for International Development,
and many others.
3. As noted in the discussion on methodology, other control variables included the rural/
urban percentage and ethnicity.
Table 3.4 Association of Log of Per Capita Spending on Agricultural Extension Workers
with Log of Yield
Independent variable
Dependent variable/indicator
(yield in quintals/ha) Coefficient/(SE) Significance
Log of expenditure Log of cereal yield 0.128
(0.0489)
***
Log of pulse yield 0.020
(0.0645)
NS
Log of root crops yield 0.320
(0.2266)
NS
Log of vegetable yield 0.582
(0.1330)
***
Log of oilseed yield 0.118
(0.1900)
NS
Log of enset yield 2.397
(0.5766)
***
Log of fruit yield 1.790
(0.2669)
***
Log of coffee yield 1.267
(0.2342)
***
Source: Cross-time pooled AGSS data from 2008 to 2011.
Note: AGSS data aggregated to the zonal level. Number of observations: 167 (cereals), 159 (pulses), 152 (root
crops), 167 (vegetables), 151 (oilseeds), 90 (enset), 162 (fruits), and 137 (coffee). Standard errors given in
parentheses; *** indicates significance at 1 percent level; NS is not significant.
29Improving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
The analyses in the previous sections find that decentralized spending on education,
health, and agriculture at the woreda level is efficient, contributing positively and
significantly to major development objectives in each sector. But has that spending
also been equitable? This section examines several facets of the equity question,
including the extent to which investments and outcomes may have varied by
income group, gender, region, or ethnic group. The analysis should shed some
empirical light on whether decentralized spending on service provision has fur-
thered the government’s objective of shared growth by targeting individuals in the
two lowest wealth quintiles, and whether it has supported the constitutional objec-
tive of providing additional resources to historically underserved populations.
Woreda Block Grant Spending on Health Improves Outcomes,
Especially for the Rural Poor
As mentioned, Ethiopia has met the Millennium Development Goals (MDG) of
reducing the mortality rate by two-thirds in children under five years. This
impressive achievement is due in no small part to rising local health budgets that
pay for staff who provide the services and promote the behaviors that reduce
under-five mortality. Similar improvements have been seen for other health indi-
cators. Because Ethiopia conducted its Demographic and Health Survey (DHS)
one year prior to the Promoting Basic Services (PBS) Program and then five years
into its implementation, the data can reveal how the program may have affected
individuals grouped by income level and location (in a rural or urban area). As
most PBS resources flow to rural areas, this breakdown makes it possible to view
the effects of health extension workers (HEWs) more clearly.
Figure 4.1 demonstrates the substantial improvement seen among rural peo-
ple for all six health indicators between 2005 and 2011. It also shows that—in
the majority of cases—the improvement was greatest among the bottom two
wealth quintiles.1 Contraceptive acceptance rates rose over 200 percent for the
bottom two wealth quintiles, more than twice as much as in the top two
CHAPTER 4
How Equitable Is Decentralized
Spending at the Woreda Level?
30 How Equitable Is Decentralized Spending at the Woreda Level?
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
quintiles. Similarly, for measles vaccination rates, antenatal care, and delivery by
a skilled birth attendant, the poorest quintile showed the largest improvement.
All of these outcomes are highly influenced by the presence of health workers in
the field, which is financed by intergovernmental fiscal transfers (IGFTs) through
the PBS Program.
The poorest quintiles also saw improvements in child and under-five mortal-
ity, more so than the richest quintile, but to a lesser degree than other quintiles.
Outcomes for these indicators, unlike those for the other indicators, are particu-
larly susceptible to factors outside the control of local recurrent health expendi-
ture. Food security, nutritional status, and a mother’s education all play a larger
role than local health spending in driving these outcomes and can have an out-
sized effect among poorer individuals. It is telling that improvements in child
mortality are larger than improvements in under-five mortality. The implication
is that services—in the form of the health extension packages offered by HEWs
(see box 3.1)—target children more than infants.
Figure 4.1 Percent Improvement in Selected Health Indicators Among Rural People
Between 2005 and 2011, by Wealth Quintile
Measles vaccinatio
n
ANC: Doctor, nurse, midwife, or HEW
Delivery: Doctor, nurse, midwife, or HEW
Contraceptive prevelance rate
Child mortality (1–5 years old)
Under five mortality
Percent improvement between 2005 and 2011 DHS
−20
30
80
130
180
230
280
Poorest Second Middle Fourth Richest
Source: World Bank, based on DHS 2005, 2011 data.
Note: ANC = Antenatal care; HEW = health extension worker.
How Equitable Is Decentralized Spending at the Woreda Level? 31
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The probability of improvement in some of these outcomes can be estimated
based on whether a household has had contact with an HEW (using 2011 DHS
data on contacts with HEWs). For example, the 2011 survey asked whether a
“family planning specialist or HEW” had visited the household in the past year.
As many of the outcomes fit nicely into a binomial response (use of contracep-
tion versus no use of contraception, for instance), it is possible run a probit model
in which the response to the question about an HEW visit is the right-hand-side
variable and the left-hand side is either “success” or “failure” in achieving the
health outcome. This approach assumes that an HEW can deliver multiple mes-
sages per contact, and not (for example) just a message about family planning.
The model coefficients are then used to determine predicted probabilities for
each specific outcome.
In fact, a household was more likely to achieve an outcome if an HEW had
visited (table 4.1). This association holds across all outcomes for urban and rural
locations, and for three of the four outcomes examined by wealth quintile,
despite problems related to the small samples for some quintiles.2 For example,
pregnant women in the poorest rural households were 15 percent more likely to
receive antenatal care and 12 percent more likely to vaccinate their child against
measles if they had received a visit from an HEW than if they had not. The richer
the household, the more likely it was to achieve many of the health outcomes
examined here, probably because of unobserved factors, the foremost of which
is probably women’s education.
Table 4.1 Predicted Probabilities for “Successful” Health Outcomes by Place of Residence and Wealth
Quintile if an HEW Visited the Household in the Past Year
Residence
Income
quintile
Contraceptive
use
Measles
vaccination
ANC with doctor,
nurse, midwife,
or HEW
Delivery by
doctor, nurse,
midwife,
or HEW
Urban Total 0.071*** 0.176*** 0.124*** 0.110***
Rural Total 0.094*** 0.144*** 0.107*** 0.017**
Poorest 0.043** 0.115*** 0.148*** NS
Second 0.078*** 0.106** 0.073*** NS
Middle 0.069*** 0.123*** 0.097*** NS
Fourth 0.108*** 0.181*** 0.096*** 0.022*
Richest 0.127** 0.189* 0.130** NS
Source: Based on probit models.
Note: Number of observations varies by quintile, location, and outcome (see appendix A for details); *** indicates significance at 1% level,
** at 5 percent, and * at 10 percent. NS is not significant.
32 How Equitable Is Decentralized Spending at the Woreda Level?
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Incidence Analysis of Woreda Block Grant Spending on Health
and Education
In examining the equity effects of the PBS Program, an important step was to
analyze the incidence of health and education spending at the woreda level by
wealth quintile. The most common form of incidence analysis relies on facility and
service information by income group, but data constraints eliminated that
approach. Instead, the analysis relied on DHS 2005 and 2011 data. The incidence
of increase in per capita expenditures in the health and education sectors over
2005–11 was allocated by quintile based on the ratio of the improvement in
results in that quintile to the average improvement in results (see appendix A,
equation [A.4]). For education, one-result variable (net enrollment rate) was con-
sidered, whereas for health, the analysis used an average of the four results that can
be affected by HEWs (vaccination, contraceptive use, antenatal care, and deliveries
by skilled birth attendants). Given that the HEW system started between the two
rounds of the DHS, the data constitute something of a natural experiment on the
impact of HEWs. As noted, data on the use of HEWs’ services from DHS 2011
indicate that HEWs have had a proportionately very strong effect on the four
results just listed, particularly among individuals in the bottom quintiles.
For education, woreda-level spending appears to be pro-poor. The bottom
40 percent benefited from 56 percent of that expenditure, and the top quintile
benefited from 13 percent. The incidence of per capita woreda-level spending
on education was more than 2.5 times higher for the bottom quintile than for
the top quintile (table 4.2). For health, a similar pattern emerged: 63 percent
of the health expenditure at the woreda level accrued to the bottom 40 per-
cent, whereas 10 percent accrued to the top quintile.3 For someone in the bot-
tom quintile, the benefit incidence of per capita woreda-level health spending
was more than three times higher than it was for someone in the top quintile.
A forthcoming study of multiple countries,4 using a standard methodology,
corroborates the results obtained with the less-orthodox methodology used here.
It also finds that woreda-level spending (financed through the PBS Program) is
significantly more pro-poor than overall spending in education and health.
Specifically, the overall incidence of all public education spending on the bottom
40 percent was 33 percent (it was 34 percent for health).
Table 4.2 Incidence of Woreda-Level Spending by Wealth Quintile
Bottom 40%
share (%)
Top 20%
share (%)
Multiple by which
bottom quintile
exceeds top quintile
Education spending 56 13 2.7
Health spending 63 10 3.4
Combined education and
health spending 58 12 2.9
Source: World Bank estimates based on several sources according to the methodology in appendix A of this book.
How Equitable Is Decentralized Spending at the Woreda Level? 33
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
Catalytic Effect of Spending on Extension Services by Plot Size
Does the catalytic effect of spending on agricultural extension services vary by
plot size? This question was explored using Agriculture Sample Survey (AGSS)
data grouped by plot-size quintile. Regression analysis was done for each quintile
to estimate the effect of each birr of spending on agricultural extension services
on the probability that farmers in that quintile would use improved techniques
(defined as improved seed, irrigation, or fertilizer).
Table 4.3 clearly shows that agricultural extension spending at the woreda
level increases the use of improved farming techniques across all plot-size quin-
tiles. The magnitude is relatively low in the bottom quintile, which may reflect
financial constraints on purchasing inputs and otherwise investing in improved
techniques. If so, this constraint could be addressed by improving access to rural
finance.
Gender Equity Analysis for Woreda Block Grant Spending
Another major question related to equity is whether there is a gender bias in
PBS expenditures on health, education, and agriculture. In health, the answer
is an obvious yes. Women in the community, along with children, are the pri-
mary focus of outreach by HEWs and benefit from most of the packages they
deliver (box 3.1). Spending on health by the woredas can also be considered
pro-woman because so much of that spending is positively associated with
increasing women’s access to services that have a strong impact on reducing
maternal mortality—including contraception, antenatal care, and assisted
deliveries.
A more precise way to answer the gender equity question is to look at the
association of expenditure with data on results disaggregated by gender, but such
data are available only for education, and even then only for certain indicators.
Table 4.4 provides key coefficients for education recurrent expenditure on net
enrollment rate and net intake rate (NIR) at the primary level, disaggregated by
Table 4.3 Effect of ETB 1 Spending on Agricultural Extension Workers on Probability of
Using Improved Farming Techniques, by Plot-Size Quintile, 2011
Plot-size quintile Any improved technique
Smallest and poorest 0.000322***
Second smallest 0.000344***
Middle 0.000524***
Fourth 0.000667***
Largest and richest 0.000818***
Source: Based on probit models using AGSS data.
Note: Cross-sectional data with 303,242 observations (which are plots, not total household land holdings). Standard
errors given in parentheses; *** indicates significance at the 1 percent level. NS is not significant.
34 How Equitable Is Decentralized Spending at the Woreda Level?
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gender. The coefficient for female primary school students is slightly higher than
for males for both the net enrollment and intake rates, but this difference is not
significant. The important finding here is that there is no negative bias against
females in expenditure on education, the sector that receives the bulk of PBS
Program funds.
By contrast, evidence from the agricultural sector implies an apparent bias in
outcomes (female farmers are less likely to benefit from extension services),
which was also found in a study by the International Food Policy Research
Institute (Ragasa et al. 2012). The reasons for this bias are not clear, but it could
reflect a wide range of circumstances, such as a tendency for extension workers
to target male farmers (87 percent of Ethiopia’s farmer are male), a tendency of
women farmers to grow crops of different types or quality than those grown by
men, or a tendency of female farmers to have smaller holdings.
Table 4.5 shows the probability that improved farming techniques will be
used on a field, disaggregated by the gender of the head of the household. About
13 percent of fields in the sample are farmed by female-headed households; such
fields are significantly less likely to benefit from extension services, though the
effect is relatively small. Again, in interpreting these results, it is important to
bear in mind that many other factors also influence the adoption of improved
farming techniques, the sample size for female-headed households is small, and
the quality of the data could be improved. Further analysis is required to deter-
mine whether extension workers are indeed preferentially targeting fields owned
by men and to develop policy responses based on the evidence.
Table 4.4 Association of Log of Education Expenditure with Log of Net Enrollment Rate and
Log of Net Intake Rate, by Gender
Independent variable
Dependent variable/
indicator Coefficient/(SE) Significance
Log of expenditure Log of NER grades 1–8, male 0.115
(0.0116)
***
Log of NER grades 1–8, female 0.158
(0.0137)
***
Log of NIR grades 1–8, male 0.390
(0.0240)
***
Log of NIR grades 1–8, female 0.430
(0.0269)
***
Source: Based on Poverty and Social Impact Analysis Database from 2008 to 2011.
Note: Number of observations is 2,583 for NER and 2,464 for NIR; *** indicates significance at 1 percent level. NS is not
significant. NER = net enrollment rate; NIR = net intake rate.
How Equitable Is Decentralized Spending at the Woreda Level? 35
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Table 4.5 Predicted Probabilities of Improved Farming Techniques Being Used on a Field,
by Gender of Household Head, 2011
Household head
Probability that an improved
technique is used on a field
Male 0.000027***
Female 0.000023***
Source: Based on probit models using AGSS data.
Note: Number of observations is 303,242. Standard errors given in parenthesis; *** indicates significance at 1 percent
level.
Notes
1. Owing to the small urban population in Ethiopia, the samples for the wealth quin-
tiles contained too few observations to be representative.
2. For example, only 1,000 deliveries attended by a doctor, nurse, midwife, or HEW were
reported, making it difficult to obtain reliable estimates when the data were disag-
gregated by wealth quintile.
3. Thirty-five percent of woreda health and education expenditures accrued to the bot-
tom quintile.
4. See Woldehanna, Tsehaye, and Hill (forthcoming).
37Improving Basic Services for the Bottom Forty Percent • http://dx.doi.org/10.1596/978-1-4648-0331-4
The Government of Ethiopia has made the development of historically disad-
vantaged groups and areas a priority. Its system of fiscal decentralization trans-
fers funds to local governments based on formulas applied at the federal and
regional levels, and level of development is a primary element of those formulas.
The following sections examine the allocation of subnational expenditures by
geographical area and ethnic group.
Regionally Disaggregated Analysis of Woreda Block Grant Spending
Figure 5.1 is a simple scatterplot of per capita subnational expenditures across
Ethiopia’s 718 woredas in 2010, in which each woreda is represented by a dot.
Identification numbers assigned by region are on the x-axis, which naturally
groups woredas by region, demarcated in red. The dashed yellow line shows the
average expenditure in Ethiopia across all woreda, at Ethiopian birr (ETB) 183
per capita.
Most woredas fall into a spending band of ETB 150–250 per capita. The lower
outliers cluster near this band, whereas some outliers range as high as ETB 1,000
per capita. Taking ETB 385 per capita, 110 percent above the national average,
as the cut-off. Table 5.1 provides data on the higher outliers.
Seven of the woredas that spend the most on basic services, including the five
highest observations nationwide, are in Gambella. More than 50 percent of the
woredas in Gambella spend more than 110 percent of the national average on
the basic service sectors, and so do six woredas in Beneshangul-Gemuz, repre-
senting 30 percent of the woredas in that region. Gambella and Beneshangul-
Gemuz are among the regions that historically have been the most economically
deprived. Another six woredas where per capita spending on basic services is
higher than the average are in Tigray. Among the much larger regions that have
dominated government and the economy since the days of the empire, Amhara
has only two woredas where spending exceeds ETB 385 per capita, and Oromia
CHAPTER 5
The Federal Systems Role in Helping
Lagging Areas and Groups
38 The Federal System’s Role in Helping Lagging Areas and Groups
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Figure 5.1 Woreda Total Recurrent Expenditure Per Capita, 2010
0
0 100 200 300 400 500 600 700 800 900
200
400
600
800
1,000
1,200
Tigray
Afar
Amhara
Oromia
Somali
Gambella
Southern
Nations
Harar
Dire Dawa
Avg = ETB
183/capita
Beneshangul Gemuz
Total recurrent expenditure per capita., 2003
Woreda number
Source: World Bank estimates based on data described in appendix A of this book.
Table 5.1 Woredas Spending More Than 110 Percent of the National Average on Basic
Services, by Region, 2010
Region No. woredas
No. woredas above
110% national
average
Percent of woredas
above 70% national
average (%)
Tigray 46 6 13
Afar 30 0 0
Amhara 137 2 2
Oromia 278 6 2
Somali 48 0 0
Beneshangul-Gemuz 20 6 30
SNNP 144 2 1
Gambella 13 7 54
Harari 1 0 0
Dire Dawa 1 0 0
Source: World Bank.
Note: SNNP = Southern Nations, Nationalities, and Peoples (Region).
The Federal System’s Role in Helping Lagging Areas and Groups 39
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has six. The observations for the lowest spending levels appear in Amhara,
Oromia, and Somali. In terms of expenditure per capita, then, the current sys-
tem broadly favors Ethiopia’s historically disadvantaged regions at the expense
of the historically dominant ones. At the same time, table 5.1 shows that the
federal system also prioritizes underserved areas in regions with the larger, more
established ethnic groups, such as the Amhara, Oromo, and Tigrayan. The next
section looks in greater detail at Woreda Block Grant spending by ethnic group.
Ethnically Disaggregated Analysis of Woreda Block Grant Spending
Ethiopia’s complex history explains some of the regional differences in develop-
ment.1 In the late nineteenth century, areas consisting of today’s Beneshangul-
Gemuz, Gambella, Southern Nations and Nationalities, Afar, Oromia, and Somali
Regions were brought under the feudal system of the Ethiopian Empire, based in
the highlands of north-central Ethiopia. Relations between the newly integrated
areas and the historic center of the empire were troubled. Owing to the structural
weakness of the center, successive Ethiopian governments did not command
effective control over the periphery. Similarly, exploitive economic policies pro-
mulgated by the center resulted in visible marginalization and relative underde-
velopment at the periphery of the empire. This dynamic persisted through the
socialist era. It was not until 1991, when the Ethiopian People’s Revolutionary
Democratic Front came into power, that ethnic federalism took root in Ethiopia.
A primary objective of this new government was to reverse the policy of eth-
nic homogenization and promote “equitable and broadly shared” economic
growth among all regions. Achieving this objective involved affirmative action in
the form of increased budget allocations to historically less developed regions.
Preferential treatment of previously disadvantaged ethnic groups within Ethiopia
is helping to create a more equitable base for development. The small lagging
groups appear to be faring well, yet at the woreda level, the largest lagging
group—the Somali—is not receiving the additional resources per capita war-
ranted by its development status. The reason for this disparity appears to be that
during the four years covered in this analysis, the Somali Region transferred only
49 percent of its Federal Block Grant resources to woredas, compared to the
average of 73 percent for all other regions.2
Ethiopia has 91 registered linguistic groups and 93 registered ethnicities, mak-
ing it impractical to include a full set of dummies for either of those variables, let
alone both, in the econometric estimations. Most of these language and ethnic
groups account for less than 1 percent of the population. Given that the five
largest ethnicities are heavily concentrated in their five home regions, controlling
for region in the regression models is substantially similar to controlling for eth-
nicity. For that reason, the econometric models focus on smaller ethnic groups,
particularly a subset of historically disadvantaged groups.
Using demographic data from the 2007 census, the analysis focuses on the
Nuwer and Anyiwak3 from Gambella. All other ethnicities, representing less than
1.5 percent of the population, are combined into a separate group (“other small”).
40 The Federal System’s Role in Helping Lagging Areas and Groups
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Total recurrent expenditure per capita at the woreda level between 2008 and
2011 is then compared for these categories versus the largest ethnic groupings in
the country, omitted from the estimations, such as Amhara, Oromo, and Tigrayan.
Other estimations not reported here substituted linguistic dummies for ethnic
dummies, with no significant change in the results. Dummies for Ethiopia’s 12
regions also mirror the main findings with respect to large versus small ethnic/
linguistic groups, and they did not substantially change any of the other findings.
Table 5.2 provides the key results. It shows that ethnicities with a smaller
proportion of the population receive a larger share of recurrent expenditure,
particularly the Anyiwak from Gambella, with ETB 770 more per capita than
larger groups. The Nuwer receive substantially more per capita as well—ETB
142. As the positive significant coefficient for the “other small” category shows,
ethnic groups in that category, which are more likely to be at a relative historical
disadvantage in development, receive a significantly higher proportion of recur-
rent expenditure.
Table 5.2 Selected Ethnicities’ Influence on Total Woreda Recurrent Expenditure Per Capita
Indicator: Ethnic percentage Coefficient/(SE) Significance
Nuwer 141.5
(36.92)
***
Anyiwak 769.5
(43.82)
***
Gemuz 280.3
(39.03)
***
Konso 10.5
(71.85)
NS
Somalia66.5
(14.26)
***
Afar 0.5
(17.56)
NS
Other small 32.9
(12.94)
**
Historically developed groups (Oromo, Amhara,
Gurage, Tigray)
24.9
(10.79)
**
Source: Based on Poverty and Social Impact Analysis Database from 2008 to 2011.
Note: “Other small” includes: Agew Awi, Agew Hamyra, Alaba, Argoba, Ari, Arborie, Bacha, Basketo, Bench, Berta, Bodi,
Brayle, Burji, Bena, Chara, Dasenech, Dawuro, Debase Gewada, Derashe, Dime, Dizi, Donga, Fedashe, Gamo, Gebato,
Gedeo, Gedicho, Gidole, Goffa, Guagu, Hareri, Hamer, Irob, Kefficho, Kembata, Konta, Komo, Koro, Koyego, Kunama,
Karo, Kusumie, Malie, Mao, Mareko, Mashola, Mere, Meenite, Messengo, Mejenger, Mossiye, Mursi, Murle, Nao,
Nyanegatome, Oida, Qebena, Qechem, Qewama, Shekecho, Sheko, Shinasha, Silte, Surma, She, Timebaro, Tsemay,
Upo, Werji, Yem, Zeyese, and Zelmam; *** indicates significance at the 1% level, ** at 5%. NS is not significant.
a. Data for Somali woredas may be understated, as some expenditures normally paid by woredas in other regions are
paid regionally due to security and capacity constraints.
The Federal System’s Role in Helping Lagging Areas and Groups 41
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
A central question posed in this study is whether woredas with a high propor-
tion of historically disadvantaged ethnic groups are favored or disfavored by fiscal
transfers. The higher distributions to such groups reported here indicate that PBS
Program funding in fact targets their development needs.
Notes
1. For more details see appendix C.
2. The average excludes Addis Ababa, a large city where woredas need to do less with
regard to basic service provision and other development targets. Note that data on
spending at the woreda level may be understated in Somali Region; some expendi-
tures normally paid by woredas in other regions are paid regionally due to security and
capacity constraints.
3. Nuwer is also spelled as Nuer. Note as well that the census spelling for Anyiwak is
used here; alternative forms include Anuak and Anyiwa, among others.
43Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
The evidence assembled here implies that decentralized spending at the woreda
level is both effective and pro-poor. The estimates imply that the returns to this
spending are far from decreasing, which means that Ethiopia has scope to
increase spending and speed its achievement of the Millennium Development
Goals (MDGs). In agriculture, the impact of decentralized spending could be
improved by providing better access to rural finance for the poorest producers.
Some caveats are needed with respect to these findings. In education, spend-
ing on materials and other quality drivers is not included in Woreda Block
Grants. Teachers’ salaries, which are included, usually constitute 80–90 percent
of education spending. In health, spending in the woredas does not drive the
results but should be regarded more as a catalyst to increase the effectiveness of
systemwide spending. The agricultural extension workers supported through the
Woreda Block Grants play a similarly catalytic role.
Some historically disadvantaged areas are significantly favored under the cur-
rent spending framework. Expenditure is broadly equal across Ethiopia’s wore-
das, with the striking exception of a small number of woredas concentrated in
the country’s most disadvantaged regions, which receive significantly greater
resources. Woredas receiving the least resources are concentrated in the more
developed, historically dominant regions. Four majority-Anyiwak woredas are
noteworthy for receiving more public resources than all other woredas in the
nation. At the very least, the additional resources appear to help disadvantaged
groups catch up.
The lack of data from the period prior to decentralization prevents an analysis
of the effects of decentralization per se on financial flows, sectoral outputs, or
substantive outputs. Even so, data gathered at the woreda level as decentraliza-
tion unfolds can contribute to the debate about the effectiveness of woreda-
controlled service provision. Based on the data available to date, this study finds
that contrary to the predictions of some public management theories, the decen-
tralized provision of services in Ethiopia is not increasing regional, ethnic, or
gender inequalities in investment inputs or service outputs. Indeed, the opposite
seems to be true for education and health, where the impact of Promoting Basic
Conclusions and Recommendations
44 Conclusions and Recommendations
Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
Services (PBS)-financed intergovernmental fiscal transfer (IGFT) resources was
disproportionately high among the bottom two quintiles and women. In sum,
support for decentralized services in Ethiopia appears to be an effective use of
development partners’ resources from both an efficiency and equity
perspective.
The only exception to these findings is agriculture, for which the impact of
PBS-financed IGFT expenditure was smaller for the bottom quintile. In this
instance, a wide array of factors is likely to be at work, especially poor farmers’
inability to buy inputs or the poor quality of their land.
Although quantitative evidence is unavailable at present, descriptive evidence
from the first phase of the Ethiopia Social Accountability Program implies that
structured feedback sessions involving citizens and service providers are strength-
ening citizens’ participation in pilot areas. That evidence, together with the
strong guidance emerging from governance and accountability theory, would
appear to favor the continued application of social accountability tools and the
development of policies to sustain their use in the Ethiopian context. This con-
clusion will be verified when the impact assessment for the second phase of the
Ethiopia Social Accountability Program becomes available (the only data avail-
able now are from the baseline survey).
A final important point is that the difficulty of conducting subnational empiri-
cal work on Ethiopia cannot be overstated. Creating the database for this study
required considerable effort and improvisation on the part of the research team.
The resulting standardized database of woreda-level expenditures and character-
istics, which will be made public, is a major output of this study. The data will be
augmented with new data collected under the third phase of the PBS Program
and used in future research related to the program. It is hoped that in time this
dataset will become a useful tool for researchers and students elsewhere in Africa
and beyond.
45Improving Basic Services for the Bottom Forty Percent http://dx.doi.org/10.1596/978-1-4648-0331-4
APPENDIX A
Methodology
This study relies on a database of woreda-level recurrent expenditure and out-
come information for a variety of health and education indicators between 2008
and 2011. The data are complemented by information from the 2007 census on
the demographic characteristics of each woreda, including population, shares of
population by ethnic group and by rural or urban residence, and other variables.
Econometric modeling is used to assess the impact of increased local spending
on the expansion of basic services and outcomes, and by extension the efficiency
of the PBS Program in meeting its development objective.
Cross-time pooled regressions with the outcome variable of interest on the
left-hand side were run to evaluate the impact of per capita sector expenditure,
controlling for rural/urban percentage and ethnicity, over the four years. The
outcome indicators evaluated are mostly drawn from the Promoting Basic
Services (PBS) Results Framework. No reliable outcome data at the local level
could be gathered for agriculture, water supply, or roads, however, so alternative
approaches were used (zonal data on outcomes for agriculture, and desk reviews
for water supply and roads). Note that expenditure on water supply and roads
accounts for 3 percent of woreda-level spending; agriculture, education, and
health, which are fully analyzed, account for the remaining 97 percent. National
surveys (DHS [Demographic and Health Survey] and Agriculture Sample
Survey [AGSS]) complement the analysis from the woreda-level database.
The analysis proceeded in three stages. Stage I follows the approach of Faguet
(2012) and Faguet and Sánchez (2013), examining the relationship between
woreda-level spending (a proxy for service delivery, as discussed in the main
text) in each sector on results in those sectors. That is,
lnOmt = α + ζlnEmt + βRm + δCm + ηlnKmt + τt + εmt (A.1)
where lnO is different outcome variables, such as the net enrollment rate or use
of antenatal care, capturing key outcomes in each sector; E is yearly expenditure
Detailed Methodology and Data
Sources
46 Detailed Methodology and Data Sources
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per capita in the relevant sector; K is capital expenditure per capita; R is the
percentage of rural population in each woreda; τ is a variable for the year to
control for the time-series effect in this cross-time pooled dataset; and C is a
vector of demographic controls, capturing the percentage of certain historically
disadvantaged ethnic groups that are the focus of the analysis—all indexed by
woreda m and, for expenditure, by year t. R and C are taken from the census and
do not change over time. The above was also estimated using the quadratic form
to check for decreasing marginal returns.
Omt = α + ζEmt + λEmt
2 + βRm + δCm + ηKmtt + εmt (A.2)
As Yang (2012, 1) indicates:
Interpreting the results of an analysis with log transformed data may be challeng-
ing…. A log transformation is often useful for data which exhibit right skewness
(positively skewed), and for data where the variability of residuals increases for
larger values of the dependent variable. When a variable is log transformed, note
that simply taking the anti-log of your parameters will not properly back transform
into the original metric used. To properly back transform into the original scale we
need to understand some details about the log-normal distribution. In probability
theory, a log-normal distribution is a continuous probability distribution of a ran-
dom variable whose logarithm is normally distributed.
Finally, a linear version was also tested.
Omt = α + ζEmt + βRm + δCm + ηKmt +τt + εmt (A.3)