# 4. Benchmarking Changes in Spending and Outcomes: A Guide for Policy Making

Determining how much to spend on education is in part a political decision. While education experts and policy makers might always advocate for more resources to be spent on education, finance ministers must balance competing fiscal demands and priorities for the country. Roads, health, sanitation, and infrastructure all require resources, and countries with low educational outcomes generally suffer from deficits in many of these sectors. Thus, when governments are deciding whether to give more funding to education as opposed to other sectors, they need to consider both the country’s capacity to mobilize these additional resources and the potential effect of such a move on learning outcomes. Whether the education sector ultimately gets the funding can also depend on the education minister’s ability to lobby effectively for these resources, which in turn depends on his or her ability to commit to specific results from a spending increase.

The objective of this benchmarking exercise is to establish the basis for a tool that allows countries to guide these spending decisions. It seeks to help countries compare themselves to reasonable benchmarks of changes in spending and educational outcomes based on their initial conditions. In order to benchmark spending increases, this section uses a simplified fiscal space framework to guide these types of decisions and provide country-specific benchmarks for changes in spending and changes in outcomes. These references for potential increases in spending and outcomes are based on similar country episodes and are then used for (i) benchmarking education spending for a specific country, both in terms of level of, and potential to increase, resource mobilization; and (ii) benchmarking changes in outcomes associated with increases in resources based on the country’s initial conditions. These benchmarking approaches are then used to assess the need and ability of specific countries to increase public financing for education in a financially sustainable, efficient, and equitable way (Figure 13).

**<u>Figure 13: Main Components of Fiscal Space for Education and Link to Outcomes</u>**

<!-- Start of picture text --> Education specific gov. revenue<br><!-- End of picture text --> <!-- Start of picture text --> General Government Revenues<br><!-- End of picture text --> <!-- Start of picture text --> ↓<br><!-- End of picture text --> <!-- Start of picture text --> ↓<br><!-- End of picture text --> <!-- Start of picture text --> ↓<br><!-- End of picture text --> <!-- Start of picture text --> Public expenditure<br>share of GDP<br>↑<br><!-- End of picture text --> <!-- Start of picture text --> GDP per<br>Capita<br><!-- End of picture text --> <!-- Start of picture text --> Education Share of<br>Public Expenditure<br><!-- End of picture text --> <!-- Start of picture text --> ↑<br><!-- End of picture text --> <!-- Start of picture text --> ↑<br><!-- End of picture text --> <!-- Start of picture text --> External Assistance<br><!-- End of picture text --> <!-- Start of picture text --> Deficit Financing<br><!-- End of picture text --> <!-- Start of picture text --> Spending Efficiency<br>and Effectiveness<br><!-- End of picture text --> <!-- Start of picture text --> ↓<br><!-- End of picture text --> <!-- Start of picture text --> Education Outputs<br>and Outcomes<br>(e.g., LAYS)<br>↑<br><!-- End of picture text --> <!-- Start of picture text --> Public Education<br>Spending per Capita<br><!-- End of picture text --> <!-- Start of picture text --> Other determinants<br>(e.g., income, health)<br><!-- End of picture text --> _Source:_ World Bank adaptation of diagram in Tandon (2017). _Note_ : Shaded boxes highlight the key components of fiscal space used in the approach outlined in this section.

In practice, this approach is designed to provide information that can help policy makers answer a series of questions to guide their decisions on whether to mobilize additional public resources for education. These questions include:

- How does the level of spending per student in my country compare with spending in similar countries?

- Is my country spending too much or too little?

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