Mun C. Tsang Teachers College Columbia University

1. Mun C. TsangTeachers College Columbia University Financial Disparities And Intergovernmental Grants In Compulsory Education In China

2. Sources • Tsang, M. & Ding, Y. (Forthcoming 2005). Resource utilization and disparities in compulsory education in China. China Review • Tsang, M. (2002). Financing compulsory education in China: Establishing and strengthening a substantial and regularized system of intergovernmental grants. Harvard China Review, No. 5: 15-20. Mun Tsang

3. Objectives of Presentation • Document disparities in per-student spending in compulsory (primary and lower-secondary) education in the late 1990s • Argue for the establishment of a regularized and substantial scheme of intergovernmental grants in compulsory education Mun Tsang

4. Financial Reform of Education: The Historical Context • 1985 Reform: Administrative and fiscal decentralization Diversification in resource mobilization • Achievements: Decentralized & diversified system Increased resources to education sector • Notable Problems: Financial difficulties of poor and rural areas Substantial disparities in education spending Mun Tsang

5. Research Questions • How were educational resources utilized in 1999? • What was the extent of inequality in per-student spending in 1999? • Was there any change in inequality in per-student spending between 1997 and 1999? Mun Tsang

6. DATA Financial database of the Ministry of Education • About 2,900 observations in 1999 (“county level” units) • About 2,600 observations in 1997-1999 analysis Comparison with previous studies (Jiang 1992; Tsang 1994; Wang 1998; Zhang 1998; Pan 2000; etc.) • Focus on county level (increasing important of county units) • Most comprehensive dataset • More comprehensive analysis of disparities (across regions, urban/rural, minority/non-minority areas) • Change in inequality in the late 1990s Mun Tsang

7. Summary Of Findings (1): Resource Utilization & Disparities In 1999 1. Similar pattern of resource utilization across areas and regions • Primary education: recurrent spending amounted to 94% of total spending; and personnel spending about three-quarters of recurrent spending • Lower-secondary education: recurrent spending amounted to 92% of total spending; and personnel spending about two-thirds of recurrent spending Mun Tsang

8. Summary Of Findings (1): Resource Utilization & Disparities In 1999 - Continued 2. Large variations in per-student total spending across areas and regions • Urban areas substantially more than rural areas: 84% in primary education & 69% in lower-secondary education • Region One (coastal) substantially more than Region Three (inland/west): 71% & 75% more • Non-minority areas somewhat more than minority areas: 6% & 24% more Mun Tsang

9. Summary Of Findings (1): Resource Utilization & Disparities In 1999 - Continued 3.Variation Related to How Schools Were Financed • Importance of non-government sources • Schools in less-advantaged areas depended more on government funding which was used mostly on personnel inputs • Financial difficulty was a key contributing factor to poor education inputs in poor rural areas Mun Tsang

10. Summary Of Findings (1): Resource Utilization & Disparities In 1999 - Continued 4. Measure of Inequality in Per-student Total Spending The five measures (restricted range, federal range ratio, coefficient of variation, Gini coefficient, Theil index) consistently showed a large degree of inequality at both the primary and lower-secondary education levels across areas and regions Decomposition of Theil Index Primary education: index = 0.23 (71% due to variation within provinces, 29% across provinces) Lower-secondary education: index = 0.23 (69% due to variation within provinces, 31% across provinces) Mun Tsang

11. Summary Of Findings (2): Change In Inequality Measures, 1997-1999 (Based On Per-student Total Spending) • Modest change but mixed findings • Some modest increase, based on the restricted range, federal range ratio, and coefficient of variation • No change, based on Gini coefficient • Modest decrease, based on Theil Index • Overall, little change in inequality between 1997 and 1999, but with some increased polarization at both ends of spending • Decomposition of Theil Index • Inequality across provinces increased between 1997 and 1999 Mun Tsang

12. Role Of Intergovernmental Grants In Financing Of Compulsory Education 1.Decentralization as a process in China • Administrative decentralization • Fiscal decentralization • Devolution of decision-making power • Capacity building • Accountability • Financial challenges (difficulties of poor areas & disparities) Mun Tsang

13. Role Of Intergovernmental Grants In Financing Of Compulsory Education – Continued 2.Current weaknesses in financial equalization • Amount small • Ad-hoc practice (not regularized) • Limited scope (project based, investment) Mun Tsang

14. Role Of Intergovernmental Grants In Financing Of Compulsory Education – Continued 3.Arguments for intergovernmental grant scheme • Efficiency argument • Equity argument • Socio-political argument Mun Tsang

15. Role Of Intergovernmental Grants In Financing Of Compulsory Education – Continued 4.Need for intergovernmental grant scheme • Regularized • Substantial increase over time • Broader scope (recurrent spending too) • Stable growing revenue sources • Evolving process of development Mun Tsang

16. Role Of Intergovernmental Grants In Financing Of Compulsory Education – Continued 5.Issues to be tackled over time • Appropriate intergovernmental structure • How to raise additional resources • How to distribute intergovernmental grants • Nature of decision-making process Mun Tsang

17. Table 1 Per-student spending by category, 1999 (Yuan) Mun Tsang

18. Table 7 Inequality in per-student school spending: Restricted range, federal range ratio, and coefficient of variation, 1999 Mun Tsang

19. Table 8 Inequality in per-student spending: Gini coefficient and Theil Index, 1999 Mun Tsang

20. Table 9 Decomposition of Theil indexes, 1999 Mun Tsang

21. Table 11 Changes in per-student total spending between 1997 and 1999 Mun Tsang

22. Thanks! Questions? Mun Tsang