To Boost Education, Latin America Needs to Spend More Efficiently

If it is to boost education to the standards of the OECD, Latin America and the Caribbean needs to spend more efficiently

Over the last two decades, Latin America and the Caribbean has made huge efforts to improve education. Investment in the sector has grown from 3.6% to 5.3% of GDP; the percentage of adolescents who finish primary school has reached well over 90%, and results on PISA, the international exam that measures core competencies in mathematics, language and science, have improved considerably.

At the same time, these successes have been lackluster compared to the aspirations of a region that hopes to achieve the productivity and living standards of OECD nations. Latin American and Caribbean nations on average still allocate only a quarter of the amount OECD countries spend per student. They also have much lower educational outcomes. In fact, while close to 15% of 15-year-old students from OECD countries achieved scores reflecting advanced learning on the 2015 PISA exam, less than 1.5% of students from Latin America and the Caribbean enjoyed that level of success.

Spending levels are inadequate

As we indicate, in an advance release of the IDB’s upcoming flagship report, Better Spending for Better Lives, spending is clearly part of the problem. No high performing country on the PISA exam, with the exception of Vietnam, spends under $8000 per student annually. The average in Latin America and the Caribbean is closer to $2000.

But the problem goes far beyond spending. Latin America and the Caribbean countries need to spend more efficiently and, in many cases, equitably, so that increased inputs in school systems are reflected in higher outputs, or learning. That means placing more emphasis—including higher salaries—on recruiting good teachers, by far the most important learning input, and more emphasis on ensuring that the largest investments go towards disadvantaged students, who, given their low starting point, benefit the most from good facilities and teachers.

It also means improving transparency and accountability. When teachers are hired into a school system because of a politician’s need to dispense patronage rather than because of actual need, money is wasted. And unfortunately, the higher corruption levels perceived by citizens in Latin America and the Caribbean suggest that practices such as clientelism might be more common than in other regions.

Efficiency in the region is low compared to top performers

Evidence shows that many of these problems are affecting learning in Latin America and the Caribbean and that inefficiencies remain an issue. While it is difficult to get reliable and comparable statistics on school spending, we considered three widely used proxies: the teacher to student ratio (a proxy for the quantity of human resources); the number of computers per student (an indirect measure of school facilities); and student’s socioeconomic status (a means of controlling for student backgrounds). We found in a cross-comparison of 66 countries participating in the 2015 PISA exam that Mexico and Colombia were the most efficient in the region; the Dominican Republic, the least. But all countries in the region are significantly less efficient than those topping the ranking, which are mostly from East Asia.

If it is to boost education to the standards of the OECD, Latin America and the Caribbean needs to spend more efficiently

Some of this weakness is related to equity, since the most efficient systems also tend to allocate school resources in a more equitable way. Latin America and the Caribbean generally has compensatory mechanisms to help children from impoverished and educationally-deprived backgrounds. It can be said to have relatively good levels of vertical equity—helping those from below—similar to that of the OECD. Peru, for example, pays teachers as much as 36% above their base salary for teaching at disadvantaged schools. Chile pays considerably more money to schools with poorer children.

Still Brazil and the Dominican Republic have relatively low levels of vertical equity, and much of the region has low levels of horizontal equity, meaning that students of similar socioeconomic status—income and parental educational levels—receive different treatment.

Problems with equity are holding the region back

That is a big problem, because it means that children of equally poor or rich backgrounds often have dramatically different educational experiences. Some local governments might use their discretionary powers to award more money to schools serving poor families than other local governments. Or in a worst-case scenario, local politicians paying off political supporters with temporary teaching jobs may hire an excess of teachers to schools in their districts, while neighboring districts of similar socioeconomic status go short. These inequities may be less likely to occur in countries where there are centralized funding schemes and local governments have less discretionary power. But in many other countries, it leads to levels of horizontal equity that are considerably below those of the OECD and significant inefficiencies. Clearly, greater accountability is called for. And citizens should be called to play a role in helping to control corruption wherever it exists.

Ultimately, the most important thing for the region is ensuring that well-paid and trained teachers, the largest spending item and the most important educational input, are fairly distributed, with special emphasis on helping the disadvantaged. That can happen better in more transparent systems. And it can happen in nations that understand that by far the most efficient way to spend educational funds is investing in the poor. Latin America and the Caribbean need to spend considerably more on education. Doing so efficiently and equitably are surefire ways to ensure that the spending pays off.

To read more, click here to download your copy of the advance release of the upcoming IDB flagship report.

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The Author

Gregory Elacqua

Gregory Elacqua

Gregory Elacqua is Principal Economist in the Education Division of the Inter-American Development Bank in Washington D.C. He has extensive experience in research on education policies in Latin America and has also participated in several educational reforms in the region. He has a Ph.D. in Public Policy from Princeton University.

The Author

Matías Martínez

Matías Martínez

Matías Martínez is a research consultant for the Education Division of the Inter-American Development Bank. He has worked in several research projects and school policy discussions to support the implementation of educational reforms in Chile. He holds a Master's Degree in Public Policy from the University of Chile.

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