education, income percapita, number of children and urban-rural location.<sup>42</sup> _Summing Up._ The arguments presented here show that the largest challenges for Egyptian children in unfavorable circumstances are concentrated in improving access to _eight_ opportunities. In addition, there is a clearly identified set of _five_ most influential circumstances on aggregate inequality of opportunities. Nevertheless, the circumstances of children subject to deprivation in one sector might not be the same in another. For instance, although the profile of circumstances subject to deprivation of nutrition and ECD opportunities is characterized by three circumstances, the profile of deprivation of opportunities of education is more complex and involves five additional circumstances. And this profile differs from the profile of BHS opportunities, in which regional and location variables play a dominant role.

These differences in profiles of inequality of opportunity by circumstance across sectors provide obvious rationales for differential incentives and targeting across sectors. In other words, in order to reduce the eight largest opportunity gaps for Egyptian children, targeting and incentive measures to compensate for unfavorable circumstances should be revised with differentiated and sector-specific approaches. For example, a conditional cash transfer nutrition grant could be put in place that is proportional to the number of children and targeted to the poor by proxy mean test correlated with lower income and parents’ education. This would apply to all ECD and nutrition opportunities and would be conditional on regular visits to monitor the children’s development. In the case of BHS opportunities, the key seems to be regional targeting. Finally, it seems that conditional cash transfers would work for education opportunities because they compensate for some (not all) of the unfavorable circumstances, but would require complementary interventions to compensate for all the other unfavorable circumstances.

# **_4.3 Targeting and Resource Allocation across Regions and Opportunities_**

To what extent do explicit or implicit targeting practices and rules for resource allocation across regions and sectors reinforce or counterbalance the adverse circumstances that prevent access to basic opportunities for Egyptian children? Are opportunity trends consistent with trends in resource allocation in education, health, water, and electricity, and by region? In relation to the first question, the available evidence indicates that there is room to improve the targeting of food and fuel subsidies to influence positively the HOIs of nutrition and cooking energy source.<sup>43</sup> For the second question, judging from the available evidence, the allocation of public expenditure across sectors and regions _alone_ is not consistent with the trends in most HOIs, except in two sectors. There seem to be other powerful determinants that influence the efficacy of public expenditure and are crucial in explaining the evolution of opportunities.<sup>44</sup> Given the sector priorities in the sixth five-year plan – water and sanitation, transportation, agriculture and irrigation, education, and health – public investment in those sectors would have been expected to rise. However, only the share of water in public investment increased significantly (from around 3 to 8 percent) over the decade, and to a much lesser extent the share of real estate and housing (from 0.2 to 0.5 percent). By contrast, the share of education and health services in total public investment declined from 10 and 4.5 percent, respectively, to around 3 percent in FY10, and the share of communication from around 5 to 2.5 percent. For those sectors and over the same period, the same trend applies to government investment items. At the same time, social protection expenditure increased from 1.6 percent in 2002 to 9 percent of GDP at the end of the decade, and

> 42 While the Shapley decomposition method indicates that those two circumstances account for 19 of the 32 highly influence cells of the IOC matrix, the “equalization method” assings just 13 of the 32 highly influential cells to those two circumstances.

> 43 Given the considerable magnitude of the resources devoted to services, there might be an opportunity to save public resources in these sectors. See World Bank (2010) for estimates of the savings under alternative scenarios for reform. 44 Explaining the trends in opportunities would require complex sector-specific modeling with much richer information and data to explain the behavior of all agents involved.

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