Poverty Targeting Through Public Goods

In national accounts, government expenditures are used to measure the value of public spending. These expenditures grossly overestimate the value of services received by Indian households because the public education and health sectors are characterized by high salaries, absenteeism, corruption and multiple other inefficiencies. The low quality of public services is reflected in rising private school enrolment and sizable out-of-pocket health expenditures. Twenty-five per cent of children in rural India attend private schools despite their modest means. An alternative approach is used to estimate the value of public in-kind transfers in which benefits from publicly provided goods are estimated using household willingness to pay for comparable private alternatives. [CDE Working Paper No. 271].