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Comments OECD DEV IDB DIA Better spending better lives
- 1. Comments on IDB DIA flaghship Better Spending for Better Lives Sebastián Nieto-Parra Latin America and the Caribbean Unit OECD Development Centre OECD Paris, October 30, 2018
- 2. - Why today? key topic behind fiscal legitimacy - Areas covered: policy priorities to overcome the Middle Income Trap - Other spending areas and policy recommendations Contents
- 3. Tax morale in Latin America: Do you find it justifiable not to pay taxes? (% population) Citizens’ perceptions of government effectiveness affect fiscal legitimacy Source: OECD/ECLAC/CAF own elaboration based on Latinobarometro 2015.
- 4. Tax-to-GDP ratios (Total tax revenue as % of GDP) in LAC countries, 2016 Financing needs: fundamental in the equation – poliy-making process - Source: OECD/ECLAC/CAF own elaboration based on Latinobarometro 2015. 12.6 13.7 14.4 16.1 16.6 17.2 17.5 17.9 19.8 20.4 20.5 21.4 22.2 22.4 22.6 22.7 22.9 23.2 26.0 26.7 27.9 29.6 31.3 32.2 32.2 34.3 41.7 0 5 10 15 20 25 30 35 40 45 Guatemala Dominican Republic Venezuela Peru Panama Mexico Paraguay El Salvador Colombia Chile Ecuador Honduras Costa Rica Bahamas Nicaragua LAC Average² Trinidad and Tobago Guyana Bolivia Jamaica Uruguay Belize Argentina Brazil Barbados OECD Average¹ Cuba %
- 5. Beyond Wagner’s law: going beyond GDP to measure development (case of Panama) Source: OECD (2016), Multidimensional Country Review of Panama
- 6. Latin American population by socio-economic groups (% population) Citizens’ demands: More than countries’ middle income status… Note: The affluent, those that earn over 50 USD per day are not included. Source: OECD/ECLAC/CAF based on LAC Equity Lab tabulations of SEDLAC (CEDLAS and the World Bank, 2017). 42.9 35.4 34.1 37.6 21.1 24.6 15 20 25 30 35 40 45 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Middle class (13-70USD) Vulnerable (5.5-13 USD) Poor (under 5.5 USD)
- 7. - Why today? key topic behind fiscal legitimacy - Areas covered: policy priorities to overcome the Middle Income Trap - Other spending areas and policy recommendations Contents
- 8. Policy priorities to evade the middle-income trap (Discriminant analysis evaders vs. trapped, average loading) Note: Ranking of importance from left to right. Average loading. Source: Melguizo, A. S. Nieto-Parra, J.R. Perea and J.A. Perez (2017), “No sympathy for the devil! Policy priorities to overcome the middle- income trap in Latin America”, OECD Development Centre Working Paper, No. 340. 8 To spend better in key policy area covered in the report 0 0.2 0.4 0.6 0.8 1 1.2 Rule of law Quality of education Tax revenue Combined polity score Gross capital formation Capabilities (Technological Diffusion) Tertiary schooling Stocks traded Domestic credit
- 9. - Why today? key topic behind fiscal legitimacy - Areas covered: policy priorities to overcome the Middle Income Trap - Other spending areas and policy recommendations Contents
- 10. Improving tax expenditure information availability is critical to improving program targeting Countries in which tax expenditure estimations are carried out by national institutions on a regular basis • Argentina – MECON • Bolivia – Ministry of Economy and Public Finances • Brazil – Receita Federal • Chile – Internal Revenue Service • Costa Rica – Ministry of Finances • Ecuador – Internal Revenue Service • Dominican Republic – Ministry of Finance • Guatemala – Tax Administration Agency • Mexico – SHCP • Peru – SUNAT • Uruguay – DGI Tax expenditure estimations are not regularly produced and their estimation is outsourced • Colombia - World Bank (2012) • El Salvador – Funde (2010) • Honduras – CIAT (2012) • Nicaragua – (2010) • Panama - (OECD MDCR 2018) • Paraguay – GIZ,CIAT and SET (2015) • Venezuela – ECLAC (2008).
- 11. Multi-level capacity: redefining public spending from commodities resources at sub-national level Source: OECD (2016) Multi-dimensional Review of Peru (2016) 0 5 10 15 20 25 30 0 200 400 600 800 1000 1200 1400 1600 1800 % Canon and royalties* Population with at least one unmet basic need (right axis; in %) Resources and basic needs across the regions in Peru, 2013
- 12. School endowments and performance: Private vs. Public Schools -60 -40 -20 0 20 40 60 80 100 120 140 Others OECD MEX COL CHL ARG LA CRI PER BRA URY Private Private after controlling for ESCS of student Private after controlling for ESCS of student and school Performance differences between private and public schools before and after controlling ESCS Source: Avendaño, R., Barrera F., Nieto Parra S. and Vever F. (2016), "Understanding student performance beyond traditional factors: Evidence from PISA", OECD Development Centre Working Papers, No. 331, OECD Publishing, Paris.
- 13. School endowments and performance: “soft policies” to increase performance Some cost-effective pedagogical actions associated to quality of the educational system in Latin America… …Whereas some traditional inputs not necessarily linked with performance. Effect on performance in mathematics (in months of schooling, after a 1-s. d. change) -3 -2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2 Extra-curricular classes Feedback Tutorials Use of assessment data High expectations Classroom time Private status Proportion of certified teachers with ISCED5A Proportion of certified teachers Class size ^(1/2) Latin America OECD Traditional factors Pedagogical factors Source: Avendaño, R., Barrera F., Nieto Parra S. and Vever F. (2016), "Understanding student performance beyond traditional factors: Evidence from PISA", OECD Development Centre Working Papers, No. 331, OECD Publishing, Paris.
- 14. Source: World Development Indicators 2018 Time to export, border compliance (hours) Using “soft” policies: cost-effective policies to increase connectivity. Public investment vs. logistics 0 20 40 60 80 100 120 288
- 15. Source: Bitran, E., Nieto-Parra, S. and Robledo, J.S. (2013), “Opening the Black Box of Contract Renegotiations: An Analysis of Road Concessions in Chile, Colombia and Peru”, OECD Development Centre Working Papers 317 Renegotiation costs of concession contracts in selected countries 0 10 20 30 40 50 60 70 80 90 100 1993 1994 1995 1995 1995 1996 1996 1997 1997 1997 1998 1998 1998 1999 1999 1999 2001 2002 2002 2003 2004 1994 1994 1994 1994 1994 1994 1995 1995 1996 1997 1999 2001 2002 2004 2004 2006 2007 2007 2007 2007 2007 2010 2010 2010 2010 2003 2005 2005 2005 2005 2005 2007 2007 2007 2009 2009 2009 2009 2010 Chile Colombia PERU % Value of initial contract Additional cost PPPs can be costly to governments: To spend better through PPPs (more info needed)
- 16. 0.0 500,000.0 1,000,000.0 1,500,000.0 2,000,000.0 2,500,000.0 3,000,000.0 Private Investment Present Funds Deferred Funds 0.0 500,000.0 1,000,000.0 1,500,000.0 2,000,000.0 2,500,000.0 3,000,000.0 Value Initial Contract 0.0 500,000.0 1,000,000.0 1,500,000.0 2,000,000.0 2,500,000.0 3,000,000.0 Private Investment Payments from the State 0.0 500,000.0 1,000,000.0 1,500,000.0 2,000,000.0 2,500,000.0 3,000,000.0 Value Initial Contract Value Renegotiations Total value of initial contract Value including renegotiations Division between payments by the private and the State Large part of State payments made through deferred funds Case of Colombia: PPPs on road concessions Source: Bitrán E., S. Nieto-Parra and J.S. Robledo (2013). Note: Values in Millions of constant Pesos of Dic/09
- 17. Comments on IDB DIA flaghship Better Spending for Better Lives Thank you for coming! Sebastián Nieto-Parra Latin America and the Caribbean Unit OECD Development Centre OECD Paris, October 30, 2018
Editor's Notes
- Alternatively, countries could choose to keep spending relatively constant while greatly boosting the quality of public services, thus improving key outcome measures such as the population’s health and the quality of primary and secondary education.
- Indicators from World Bank
- Indicators from World Bank
- Indicators from World Bank
- - Rule of Law: Captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.
- Alternatively, countries could choose to keep spending relatively constant while greatly boosting the quality of public services, thus improving key outcome measures such as the population’s health and the quality of primary and secondary education.
- Alternatively, countries could choose to keep spending relatively constant while greatly boosting the quality of public services, thus improving key outcome measures such as the population’s health and the quality of primary and secondary education.
- Despite significant increases, decentralization of tax powers remains weak. Need to increase capacity and distribution of resources within countries’ regions.
- Value of renegotiations and Payments by the State refer to direct fiscal costs. This is an underestimation of the true value of renegotiations, as some of them are paid by an extension of term, increase in toll prices and other ways.