Chain A: from EG to HD
Gross national product (GNP) contributes to HD through household and government activity, community organizations and non-governmental organizations (NGOs). The same level of GNP can lead to very different HD performances depending on the allocation of GNP to various groups and to distribution within each category.
The propensity of households to spend their income on items which contribute most directly to the promotion of HD, e.g., food, potable water, education and health, varies depending on the level and distribution of income across households, as well as on who controls the allocation of expenditure within households. In general, as the incomes of the poor rise, the proportion of income spent on HD increases (Behrman, 1993, 1996). This means that higher and more equally distributed growth is likely to enhance HD expenditure, as is shown by much empirical evidence. For example, one estimate suggests that if the distribution of income in Brazil was as equal as that in Malaysia, school enrolments among poor children would be 40 per cent higher (Birdsall, Ross and Sabot, 1995). There is also substantial evidence that greater female control over household expenditure increases HD allocations. In Côte d’Ivoire, for instance, an increase in women’s share of household cash income was associated with signifi cantly higher
spending on food and reduced spending on alcohol and tobacco (Hoddinott and Haddad, 1991).
Turning to government—both central and local—the allocation of resources for improving HD
is a function of total public sector expenditure, how much of that expenditure fl ows to the HD sectors, and the way in which it is allocated within these sectors. This can be expressed in the form of three ratios (UNDP, 1991)—the public expenditure ratio, defi ned as the proportion of GNP spent by the various levels of government; the social allocation ratio, defi ned as the proportion of total government expenditure devoted to the HD sectors; and fi nally, the priority ratio, defi ned as the proportion of total HD sector expenditure allocated to priorities within these sectors. To clarify, within HD sectors, those expenditures which are clearly much more productive than others in terms of achieving advances in HD are defi ned as ‘priorities’:
for example, basic education, especially at an early stage of development, is generally recognized to have had a larger impact on HD than tertiary education. The precise defi nition of what constitutes a priority will, however, inevitably vary according to a country’s stage of development, rendering this third ratio more arbitrary than the other two. Very large variations in each of these ratios exist across countries, which means that the same level of GNP may be associated with very different levels of government spending on HD priorities (UNDP, 1991: chap. 3, 1996: chap. 3). There is evidence that local government, ceteris paribus, tends to favour HD allocations relative to central government (see Klugman, 1994; Habibi and others, 2003; Ranis and Stewart, 1994).
The signifi cance of public expenditure choices for improving HD is illustrated by a comparison
between Kenya and Malawi. In the 1980s, a similar proportion of national income went to public expenditure (27 per cent in Kenya; 30 per cent in Malawi), but Kenya had a signifi cantly higher social allocation ratio (47 per cent, compared to 35 per cent) and priority ratio (34 per cent, compared to 14 per cent), so that the proportion of gross domestic product (GDP) going directly to HD-improving priorities in Kenya was over three times that of Malawi (5.1 per cent, compared to 1.5 per cent) (UNDP, 1996: 71).2
Finally, NGO or other civil society activity is typically heavily oriented towards HD objectives
(e.g., projects generating income for the poor and spending on schools, nutrition and health). Although in
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