o Is my country’s level of spending explained by:

- Size of the economy or economic growth?

- Size of government (share of government revenues in GDP)?

- Prioritization of education in the government budget?

-

- How fast can my country mobilize additional resources:

- If I follow the average country?

- If I follow countries with the fastest spending growth?

-

- What are the policy levers that I can move to increase spending?

- Is prioritization of education in the budget low, thus requiring only a change in priorities?

- o Does the increase in spending depend on the overall government budget and thus needs a fiscal reform?

-

- What is my country likely to achieve in terms of outcomes from this increase in spending:

- If I compare myself to the countries with average returns?

- If I compare myself to the countries with the highest returns?

- If I compare myself to the countries with the lowest returns?

Jointly, all these questions guide the decision of how much education spending should increase. They also require accountability from the education sector by asking: What should I expect from this increase in resources?

The approach outlined in this section is not expected to provide a complete country-level education financing strategy. It uses broad public finance indicators to identify whether a country has the fiscal space to mobilize additional public resources for education. Ideally, the results from this exercise would serve as a starting point for a more detailed country-level assessment of whether and how additional funds should be diverted to the education sector. For example, the approach outlined will identify whether a country has the potential to increase public spending as a share of national income, based on a comparison with similar countries. However, a more detailed country assessment would be needed to determine whether increases in public spending are feasible and whether they could be financed through a growth in tax revenues, borrowing, or increased external assistance (see Figure 13).

The approach has some limitations due to the poor quality of existing spending data. If we had complete data on spending and outcomes for all countries, this approach would be able to provide much more realistic scenarios on the feasibility of adjusting resource levels and improving outcomes in all countries. As highlighted in Section 2, there is only limited information on private education spending and this can affect the conclusions that can be drawn. For example, trends in outcomes will be affected not only by changes in public spending but also by changes in private education spending. Excluding these changes in private spending has the potential to affect elasticities and the conclusions that can be drawn. Moreover, the quality and coverage of public education spending data also limited the number of countries that could be included in our analysis as well as the precision of the benchmarks that could be estimated. It is expected that as more and better data become available, the benchmarking approach outlined in this section can be further refined and improved. Despite these limitations, the analysis performed on existing data highlights how the proposed approach can help guide spending decisions on education.

37