and ability by frontline providers in health and education via the observation schedules and hours taught and via the teacher and medical tests. We propose to measure effective budget and delays in salaries as a proxy for the effort exerted by higher level authorities. Finally, physical resources are measured by infrastructure and material indicators. Obviously we do not observe effort or ability directly so our approach is an indirect way of getting at the key arguments in equation (1). Moreover, the indicators, by construction, do not speak to the important question of how to affect these arguments because we cannot directly measure the incentive constraints influencing staff behavior, and even if we could we would not be able to causally link them. In fact, the cause of the problem may not be closely connected to the appropriate solution, since the institutional system has, over time, influenced norms and thus behavior. For instance, it may well be the case that low pay, or inadequate supply of inputs, has eroded (non-pecuniary) motivation to exert high effort and created norms that do not reward high effort. Then increasing pay, or increasing supply, may just result in better paid and better supplied workers that still lack motivation to serve the public.

# **2.5 Outcomes**

To avoid making structural assumptions on the link between inputs, performance and outcomes, we do not suggest that outcomes should be part of the index. However, when the various subindicators and the final index are presented, it also makes sense to report, separately, on outcomes. In health there are measures for many countries at the national level, such as U5 mortality rates. Quantity outcomes in education are also available (various measures of flows and stock of schooling) for a large subset of countries. However, on quality there is no comparable (for many countries at least) data available. Thus, we suggest that student learning achievement is collected as part of the survey in education. This in itself is a great achievement.

Available evidence indicates that the level of learning tends to be very low in SSA countries. For instance, assessments of the reading capacity among grade 6 students in 12 SSA countries indicates that less than 25% of the children in 10 of the 12 countries tested reached the desirable level of reading literacy (SACMEQ, 2000-2002). Learning outcomes will be measured by student test scores in mathematics and language. We propose that younger cohorts are tested, partly because there is very little data on their achievement, partly because SACMEQ already tests students in higher grades, partly because the sample of kids in school becomes more and more self-selective as we go higher up when drop out rates are high, and partly because we know that cognitive ability is most malleable at younger ages (see Heckman and Cunha, 2007). Our proposal is thus to test a random sample of 10 children in grade 4 on a one-to-one basis. The test should consist of 10-20 questions per subject and the question difficulty should be calibrated to ensure adequate discrimination of the tests.

In terms of an indicator, the measure should be easily interpretable, for instance the share of children that can read a simple sentence and the share of children that can add up single digits.