Health, Education and Economic Crisis : Protecting the Poor in Indonesia

When an economic crisis hits, a primary policy concern in developing countries is how social services can be protected and, in particular, how access to health and education for the poor can be maintained. Using the Indonesian Social Safety Net (SSN) as case study, this dissertation investigates the effectiveness of targeted demand side interventions in health and education as a tool to protect access to these services for the poor in times of crisis, when policy makers are faced with severe information and time constraints. The SSN was implemented in 1998 in response to the Southeast Asian economic crisis, and included a scholarship programme targeted to children from poor households, and a health card programme entitling poor households to free public health care. Both programmes followed a partly decentralised allocation process, involving geographic and community based individual targeting. The programmes were implemented at remarkable speed. In the first six months of the SNN, approximately 22 million people lived in a households that received a health card, and 2.1 million children aged 10 to 18 had a scholarship. This dissertation addresses targeting performance and dynamic marginal benefit incidence, and the impact of the programmes on education attainment, child labour and utilisation of outpatient health care. Using Indonesia's national socioeconomic survey (Susenas), the main challenge is to obtain a reliable estimate of the counterfactual: what would have happened if the SSN programmes had not been implemented? Because of non-random programme placement and data limitations, it requires non-experimental methods to answer this question. The scholarships were effective in keeping children in school and relieved the pressure on households to draw on the labour of their children. In absence of the programme 13 percent of the recipients would have dropped out of school. In addition, it reduced child labour amongst recipients by 27 percent. The scholarship were especially effective amongst those that were most vulnerable to crisis: poor rural households that reduced investment on education of the youngest and increased labour supply of the oldest children. Nevertheless, a large part of the funds have been allocated to students who would not have dropped out of school. Furthermore, priority should have been placed with protecting primary school enrolment, where the scholarships seem most effective, and with providing support for children from the poorest households in the transition from primary to secondary schooling. The effect of the health cards was compared with the effect of a supply side impulse in the form extra budgetary support that public health care facilities received as compensation for expected increased demand due to the health cards. The health card price subsidy increased health care utilisation and led to substitution from private to subsidised public care. For the non-poor the health card only affected their choice of health care provider without increasing overall utilisation. However, the poor were not responsive to the supply impulse, while utilisation of the non-poor was mainly supply driven. This emphasises that in absence of clear incentive mechanisms for health care providers, general increases in public spending are relatively ineffective in reaching the poor.