transferred by the government might be as important as those invested by households in determining human capital outcomes, information on private spending is very limited and difficult to compare across countries.<sup>2</sup> For this reason, we primarily focus on domestic government spending on education, health and social protection. However, data limitations extend to public spending as well, since these three sectors often adopt different definitions when classifying their spending and this makes it almost impossible to achieve a common definition of social spending that holds across countries.

The objective of this note is to describe the trends in government spending in health, education and social protection across countries and over time, starting from 2000 onwards, and the association between spending and human capital outcomes, as proxied by the HCI and by its sector-specific components. Far from providing a full answer to the question raised above, the analysis will help to identify those countries for which increasing the amount of social sector spending represents a first order concern when thinking of strategies to improve their outcomes. It is important to stress that also for those countries, increasing the amount of social sector spending represents a necessary, but not sufficient, condition to improve human capital outcomes.

The note is organized as follows. In section II, we will define the main variables of interest and present the main data sources for spending and human capital outcomes. We will devote great attention to highlighting the gaps in spending data. In section III, we discuss how government spending in the social sectors has evolved over time, by region and income group. In section IV, we will analyze how aggregate and sectorspecific spending correlate with the HCI, and its key ingredients. In section V, we provide a discussion about the main messages and a possible research agenda moving forward.

# II. Data

# A. Sources and definitions

The data on social spending come from a variety of sources and adopt different definitions that are discussed below. Information on the variables and the sources used for our analysis is summarized in Table 1, and the countries included in the analysis are listed in Table A.1. We combine 3 sources of data to make the first compiled data set of social sector spending for human capital:

- 1) **Health** : Government health expenditures are aggregated and refined by the World Health Organization (WHO), resulting in the Global Health Expenditure Database (GHED) (World Health Organization 2018), commonly considered the most reliable source. The data set used for this analysis is curated by the World Bank’s Health Financing Global Solutions Group (Tandon et al. 2018). The data include total government spending on all aspects of health, not distinguishing by age group or malady. WHO provides ample warning against combining estimates of current and capital health expenditures due to the deemed extremely low quality of the capital expenditure

> 2 Moreover, private spending might fulfill different functions – an indispensable substitute when public services fall short of minimum quality (which is often the case in low income countries) or simply allow users who can afford it to buy the preferred bundle of services.

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