<!-- Start of picture text --> Pollcy Reseach<br>Public Economics<br>WPS 871<br><!-- End of picture text --> This papera product of the Public Economics Division,<sup>Country Economics Department-</sup> is part of a larger effort in the department to understand<sup>and improve the relationship between public expenditures</sup> and poverty alleviation. It is a product of research<sup>project "The Analysis of Public Expenditures Incidence:</sup> Understanding and Charactcrizing Incidence at<sup>One Point in Time and Over Time`( RPO 676-42) funded</sup> by the Barlk's Research Support Budget. Copics<sup>of the paper are available free from the World Bank, 1818</sup> H Street NW, Washington, DC 20433. Please<sup>contact Ann Bhalla, room N 10-055, extension 37699 (March</sup> 1992, 67 pages).

Indonesia has made great progress in the past<sup>15</sup> years in giving the poor more access to privately provided goods such as food, clothing, and housing. Van de Walle analyzes how much progress has been iiuade in improving their access to two publicly provided social services, education and health care.

She finds that given existing pattems of use, education spending is more efficient at directly reaching the poor than is health spending. In the education sector, subsidies to primary and<sup>-a</sup> lesser extent lower secondary education are<sup>most</sup> likely to reach poorer households and raise<sup>their</sup> living standards. Education is a potentially important conduit for reaching relatively isolated rural households.

In the late 1980s, enrollments remained higher for urban than for rural areas, for male than for female children, and for the Outer Islands than for Java. But rates of improvement in enrollments during the last decade have been higher for rural, female, and poorer children<sup>than</sup> for their urban, male, and richer counterparts. The results indicate that rising living standards played a part in raising enrollment (especially<sup>for</sup> boys and in higher education). But other factors were substantially more important<sup>-</sup> notably public policy aimed at increasing the number<sup>of</sup> primary schools and teachers and at lowering<sup>the</sup> costs of having children attend elementary school. Education subsidies effectively reach<sup>the</sup> poor for two reasons: poor families have more children, and richer families self-select their children into private schools.

In the health sector, subsidies to basic primary health care provide the best avenue<sup>for</sup> reaching the poor, but they are far from ideal<sup>as</sup> an instrument for doing so. Although primary health care centers were more widely used<sup>in</sup> rural areas and by poorer groups in 1987 than they were in 1978, rich and poor now appear equally likely to seek treatment in these facilities. So, public subsidies to primary health care centers are not as pro-poor as is generally believed, although they are more so in urban than in rural areas. Making them more pro-poor would require price discrimination, and it is unclear how feasible that is in rural areas.

ThePolicy ResearchWorking Paper Scriesdisseminates<sup>the findings of work under way in theBank. An objectiveof the series</sup> is to get these findings out quickly, even if<sup>presentations are less than fully polished. The findings, interpretations. and</sup> conclusions in these papers do not necessariiy<sup>represent official Bank policy.</sup> Produced by the Policy Research Dissemination<sup>Center</sup>