IMPACT OF

DECENTRALISATION
ON PUBLIC SERVICE DELIVERY AND EQUITY
Education and Health Sectors in Poland
1998 - 2003

Maciej Jakubowski
Department of Economics, Warsaw University
CASE – Center for Social and Economic Research
email: maciej.jakubowski@case.com.pl

Irena Topińska
CASE – Center for Social and Economic Research
email: irena.topinska@case.com.pl

Impact of Decentralisation
Foreword

This paper is a product of the partnership between the

UNDP Bratislava Regional Centre for Europe (RBEC) and
the CIS, and the Center for Social and Economic Research
(CASE) in Poland. It addresses a very important topic –
the impact of decentralisation on education and health
service delivery in Poland- which has important
implications for UNDP policy advisory work on MDG-
based Poverty Reduction Strategies.

The effectiveness of sub-national public service delivery,

particularly for basic education and primary health care
present common grounds for concern for policy makers
at both national and sub-national levels The access of the
poor to these basic services is a key policy variable, and
the impact of the decentralisation on poverty reduction is
one of the main issues in the debate from the perspective
of local governments.

Traditionally the impact of decentralisation on public

services has been measured by examining the budgetary
data available and assessing per-capita spending data for
public service areas, such as health and education. This
study introduces an innovative methodology by using
household surveys in combination with data on public
expenditures. This is of interest because households are
considered to be end-users of public services, survey data
could help measure the distributional impact of
decentralisation and changes in service efficiency.
Furthermore, household expenditure data may also reveal
the disproportionate burden of both formal and informal
payments which the poor may have to pay for services
like health care.

The goal of the study is to both test this research

methodology and to come up with information that could
indicate how the effectiveness and distributional impact of
the decentralisation process might be addressed in
designing overall adjustment strategies.

Impact of Decentralisation
Executive Summary
This Study
This paper presents the findings of a study on the impacts
of the Polish decentralisation process, particularly on
public service delivery within the education sector. Also
included are partial references to changes in the health
sector, but these only serve a methodological purpose.
This study introduces a new methodological approach by
combining two different sources of data; public and
private spending datasets. This data-mix allows to
compare national and sub national outcomes with
individual effects.
While this innovative methodology can help us with
measuring impacts of (fiscal) decentralisation, this study
has also to be viewed as a pilot exercise. More time and
research is needed to optimize this kind of methodology
and to produce results that are more accurate.
Decentralisation in Poland
In the first section of the study, the main elements within
the context of decentralisation are introduced. The focus
of the study will be on Gminas (Poland’s lowest tier of
Government), due to their crucial role in public service
provision. The fiscal arrangements in Poland give these
Gminas certain autonomy, but there are still constrained
in this due to structural centralist tendencies embedded
within the system.
Changes in public service delivery are examined within
the education sector; however, one has to take into
account that apart from decentralisation, there have been
other reforms within the education sector (e.g. financing).
In regards to the similar analysis within the health sector, it
is even harder to assess the impacts of decentralisation.
Reforms are more complicated and local government’s
role is marginal.
The second section of this paper forms the core part of
the study. Impacts of decentralisation are researched in
terms of accessibility, efficiency and equity; in addition, they
are quantified with proxies. Impacts are analysed through
the perspective of public and/ or household spending.
Accessibility
The impacts of decentralisation on the educational
accessibility are measured through the proxies of number
of schools and enrollment rate. Taking into account
Gminas’ responsibilities, this part of the study focuses on
preschool and primary education.
Number of Schools
Study shows a significant decline in the number of
primary and pre-schools, with higher inter-gminas
variation regarding the latter.
Enrollment
Primary education is obligatory and therefore not subject
to analysis. Preschool enrollment is analysed through the
use of a probit function and shows a positive relation with
Gmina’s expenditure, but this effect becomes marginal for
poorer households.
Other mitigating factors,- apart from previous mentioned
reforms-, have to be taken into account when
interpreting these findings (e.g.. population decline)
Efficiency
Efficiency impacts are examined with the use of
expenditure proxies. In this case, a significant increase of
expenditures could indicate a negative effect of
decentralisation reforms.
Analyses show an irregular overall increase of public
educational expenditures, while the variation of preschool
spending among Gminas increased. In regards to
household spending, one can see that expenditures on
primary education have not changed significantly. Again,
for preschool expenditures figures differ; household
increased their expenditures.
A possible explanation for this variation of numbers
between primary and preschool education could be that
the latter is funded out of Gminas’ own budget, which, as
some argue, has come under increased pressure.
Equity
Equity relates to poverty and inequality investigations. In
this case, the focus is on the distributional effect or equity
among Gminas. The question is whether a change in
educational spending is correlated with Gmina’s revenue
or household income.
Preschool
In regards to public spending, there seems to be a positive
relation between Gmina’s revenues and pre-school
expenditure. Furthermore, research using the household
data showed that there is a relation between poverty
level and preschool participations, negatively influencing
educational opportunities for this group.
Primary School
In the case of Gminas’ revenue and expenditure for
primary education no evident relation was found. It does
however showed that Gmina’s expenditure on primary
education has a visible, however small, equalizing impact
on household expenditure.
Health Sector as Illustration of the Methodology
The rest of section focuses on the impacts of
decentralisation within the health sector.
However, due to the complexity of the reforms, the
marginal role of local government and the scarcity of
data, this part only serves to illustrate the used
methodology.
Impact of Decentralisation
Conclusions
Empirical
The conclusions that can be drawn from this paper are of
an empirical and methodological nature. The first is
related with the question whether decentralisation had an
impact on the accessibility, efficiency and equity of public
services, in this case within the education sector. One has
to approach this question from a public and household
perspective.
Accessibility, in terms of preschool participation, has not
been satisfactory and this could be seen as a negative
outcome of reforms, but not per definition of the
decentralisation reforms. When looking at preschool
enrollment in combination with equity, one has to take
into account the negative relation between household
poverty and preschool enrollment. Furthermore, the
claim is made that reforms had a negative impact on inter-
jurisdictional equity in preschool expenditure, due to the
negative relation between preschool expenditure and
Gmina revenue.
Concerning efficiency the impacts of reforms are visible,
but they do not look very significant. Household
expenditure on education has always been very low, both
in absolute and in relative terms. It has slightly increased
since 1999 but this growth was gradual.
Methodology
The used methodology is based on the assumptions that
the Polish decentralisation is a long process, but with an
expected peak during 1999/2000. Secondly, a review of
impacts needs to be accompanied with end user data.
Thirdly, that analysis should go beyond superficial
interpretation of statistics.
The study has provided some useful insights into the
impacts of decentralisation on service delivery. As a pilot
project it has also helped to review the used
methodology and assumptions. The shortcomings in
carrying out the study was that data lacked completeness
and compatibility. Furthermore, in statistical analysis it was
difficult make the right, accurate and valuable data
linkages, also, the clustering of Gminas limits into territorial
units limits research opportunities.
Overall, the study focused on Gminas within a limited
time-spam, the reforms within the education and -
especially- within the health sector seem to be more
pervasive than decentralisation alone. An accurate
account of the impacts would require a more
comprehensive and extended study with the inclusion of
other tiers of government and third parties.

Impact of Decentralisation
Introduction........................................................................................................... 6
Research.....................................................................................................................................6
Structure ..................................................................................................................................... 6
1. Overview of decentralisation in Poland.......................................................... 8
This chapter................................................................................................................................ 8
Contents..................................................................................................................................... 8
1.1 Structure of Government...................................................................................................... 8
1.2 Sub national government expenditures and revenues.......................................................... 9
1.3 Decentralisation in education and the reforms of 1999/2000..............................................10
1.4 The Decentralisation and health reform of 1999................................................................. 12
1.5 Summary............................................................................................................................. 14
This Section...............................................................................................................................15
2 Decentralisation and Educational Accessibility........................................... 16
This Chapter............................................................................................................................. 16
Contents....................................................................................................................................16
2.1 Education, Accessibility and Gminas’ statistics .................................................................. 16
2.2 Education, Accessibility and Household /Public Spending ................................................. 18
2.3 Summary............................................................................................................................. 20
3 Decentralisation and Educational Efficiency ................................................ 22
This Chapter............................................................................................................................. 22
Contents....................................................................................................................................22
3.1 Education, Efficiency and Public Spending.........................................................................22
3.2 Education, Efficiency and Household - Public expenditure compared.............................. 24
3.3 Education, Efficiency and Household spending.................................................................. 25
3.4 Summary............................................................................................................................. 32
4. Equity............................................................................................................... 34
This chapter.............................................................................................................................. 34
Contents....................................................................................................................................34
4.1 Education, Equity and Public Spending.............................................................................. 34
4.2 Education, Equity and Household Spending ...................................................................... 36
4.3 Summary............................................................................................................................. 38
5. Impact of Decentralisation in the Health Sector.......................................... 40
This Chapter............................................................................................................................. 40
Contents....................................................................................................................................40
5.1 Health, efficiency and public spending ............................................................................... 40
5.2 Health, Efficiency and the Household Perspective ............................................................. 40
5.3 Health and Equity ............................................................................................................... 43
5.4 Summary............................................................................................................................. 44
6. Main findings and conclusions..................................................................... 46
Empirical Findings .................................................................................................................... 46
Methodological issues............................................................................................................... 47
Annex I: Research Methodology......................................................................... 2

Annex II References.............................................................................................. 1

Impact of Decentralisation
Introduction

Research Structure

In Poland decentralisation started in the early nineties The text is organized in three sections supplemented with
and peaked around 1999/2000 when four sectoral annexes. The first section gives an overview of the
reforms were implemented. One of the goals of the Polish decentralisation process in Poland, with a focus to the
reform was to improve local service delivery; this report education and health sectors. The second section is the
entails an impact analysis of these decentralisation reforms core part of the report. It regards various impacts of
on service delivery. The study focuses on the changes in decentralisation in education sector, discussing them at
the educational sector and uses some aspects of the length. The end of the section presents selected aspects of
health sector for methodology purposes. Its main purpose the health care decentralisation. Section four summaries
is to provide a wide variety of empirical findings based on the main findings of the research and develop
a new methodological approach recommendations. The Methodological Annex gives insight
into data sources and methods, while the Statistical Annex
The approach focuses on combining two different sources
provides results of empirical investigation in detail. It
of data, both provided by the Central Statistical Office:
includes graphs and tables, the latter with some raw/
fiscal and administrative statistics collected at the sub- detailed figures and regression results.
national level from the (1) Regional Data Bank (RBD);
household budget surveys collected at the individual level
from Household Budget Surveys (HBS).
This data-mix allows one to compare national and sub
national outcomes with individual effects. Data were
linked through 73 territorial units (TU). Each unit
represents a group of Gminas, i.e. the lowest
administrative unit, with territorial characteristics available
in both data sets.
In general, three impacts of decentralisation have been
studied: accessibility, efficiency and equity. Given the data
scarcity, only efficiency and some aspects of equity were
approached in case of the health sector. The education
sector has been explored at length, with special attention
paid to preschool and primary schools. For the purpose
of empirical investigation, accessibility in the education
sector has been measured through school size and
enrollments, efficiency involved analysis of costs and
expenditures and equity - examination of poverty and
inequality impacts. Certainly, these three aspects overlap
from time to time; nevertheless the attempt has been
made to analyze them separately.
The empirical investigation started out with an
exploration of selected indicators from the period 1998 –
2003. On occasion these indicators were derived from
one data source; either BDR or HBS, however,
appropriate statistics from both sources were usually
combined. The second stage involved regression analysis,
conducted either for 73 TUs supplemented with HBS
averages, or for over 30,000 households supplemented
with TU average statistics. Finally, the the last part of the
study focused on the relation of imputed public subsidy
(BDR) on household material inequality (HBS) .
It should be noted that sometimes the methodology used
has not produced satisfactory results. Nevertheless, most
of them are reported.

6 Impact of Decentralisation
7 Impact of Decentralisation
1. Overview of
decentralisation in
Poland
This chapter
In this paper the impact of the Polish decentralisation
process on service delivery is studied within the
educational and health sector. The subjects of study are
the Gminas, Poland’s lowest tier of government.. Gminas’
fiscal data is used as a source of information to study
changes and impacts, this chapter will give a small briefing
of their revenues and expenditures arrangements.
Contents
1.1 Structure of Government
1.2 Sub-national government expenditures and revenues
1.3 Decentralisation in education and the reforms of
1999/2000
1.4 Decentralisation and health reform of 1999
1.5 Summary
However, for post-solidarity reformers active at that time,
such typically expected and usually listed benefits of
decentralisation were less important. They rather saw
decentralisation as a way to dismantle the communist
state and its local bureaucracy.
Furthermore, their expectation was that it would act as a
vehicle for establishing a political base for new political
agencies. Thus, they were acting with great haste.
Polish government structure consisted of three tiers of
government. Prior to the1990 election, the law defining
the division of responsibilities between Gminas, -the
lowest level of the sub-national government-, and central
government authorities was adopted. About 2500 Gminas
were established in 1990. This number slightly changed
during the period of transformation. In 2003 the numbers
were as stated below. :

1.1 Structure of Government

In Poland, decentralisation started in 1991, -at the very

beginning of the country’s transformation- , and was
strongly supported by the newly elected democratic
government. Experts claimed that decentralisation would
boost the development of civil society and increase the
efficiency and effectiveness of locally provided services.
The latter because local representatives know community
circumstances and needs better, and could better
supervise service provisions.

Table M3. Number of Gminas within each of 73 TUs, by voivodship: 2003 Source: BDR and own computation.
Urban
Rural <20 20-100 100-200 200-500 >500
Voivodship Total
thousand thousand thousand thousand thousand
dolnośląskie 79 60 27 2 0 1 169
kujawsko-pomorskie 92 37 11 2 2 0 144
lubelskie 172 28 12 0 1 0 213
lubuskie 41 31 9 2 0 0 83
łódzkie 135 24 17 0 0 1 177
małopolskie 127 29 24 1 0 1 182
mazowieckie 229 53 29 1 1 1 314
opolskie 37 22 11 1 0 0 71
podkarpackie 114 28 16 1 0 0 159
podlaskie 82 26 9 0 1 0 118
pomorskie 81 24 15 1 2 0 123
śląskie 96 33 26 8 4 0 167
świętokrzyskie 72 19 10 0 1 0 102
warminsko-mazurskie 67 34 13 2 0 0 116
wielkopolskie 117 80 27 1 0 1 226
zachodniopomorskie 53 45 14 1 1 0 114
Total 1594 573 270 23 13 5 2478

8 Impact of Decentralisation
In 1999, another major administrative reform introduced
the middle level, powiats, and scaled down the number of
voivodships, constituting the highest sub-national level of
government. In 2005, there were 314 powiats and 16
voivodships. Most powiats have from 80 to 100 thousand
inhabitants and voivodships have from 1 to 5 millions
inhabitants. Additionally, there are 65 city-powiats which
are the biggest cities comprising the tasks of Gminas and
powiats. In this report, city-powiats are usually analyzed
together with Gminas with few marked exceptions.
Below, the process of decentralisation is described using
mainly fiscal data. The section gives an overview of the
fiscal changes over the last decade. This gives a proper
background for the core analysis of this study concerning
impacts of fiscal decentralisation on service provisions and
distribution. The focus here is on Gminas.
1.2 Sub national government
expenditures and revenues
Expenditures
The role of Gminas is crucial when it comes to public
service provision. With few changes, the list Gminas’
responsibilities have remained quite stable, but the actual
meaning of these responsibilities changed over time. The
Local Government Act of March 8, 1990 states that the
scope of Gmina activity extends to all public matters not
reserved in legislation for other entities and defines
Gminas own responsibilities as including: spatial order,
local infrastructure and public transport, water supply,
sewage and waste removal, health care, education,
municipal housing, social welfare, culture, public order, fire
departments and others. This list of responsibilities is quite
general and in some cases without practical significance.
With regard to social services, it seems that education is
the biggest single category in Gmina budgets;
furthermore, social welfare is of importance. On the
other hand, health only makes up a small percent of
Gmina budgets (declining in 1999), so their role in the
health sector is quite limited. This is pictured in Figure 4
below (see also Table A3 in the annex). Expenditures on
education and health are also analyzed in more detail
below.
Figure 4 Gmina expenditure on education, health and
social welfare
1 In current prices, based on BDR and data from the Central Statistical Office. Intergovernmental transfers were not excluded.
2 For more about development of decentralized government in Poland see: Regulski (2003). Interesting information and data on fiscal
decentralisation in Poland can also be found in: Levitas (1999). Recent discussions about decentralisation in Poland and social policy
can be found in: Golinowska, Boni (ed.), 2006.
9 Impact of Decentralisation
It should be said that Gminas differ from other sub
national governments, not only in the list of responsibilities
and their role in social services provision but also in the
way they are financed. Thus, the findings that follow do
not necessarily apply to powiats and voivodships.
Gminas’ expenditures are much bigger than expenditures
of other sub national governments. This is pictured in
Figure 1 below (see also Table A1 in the annex). In recent
years, Gminas have spent as much as 8% of GDP while
powiats less than 2% and voivodships less than 1%. In
1995, Gmina expenditures amounted to 19.828 million
zlotys while central budget expenditures were equal to
91.170 million zlotys. In 2005, expenditures of all sub
national governments were equal to 103.807 million while
central budget expenditures equaled 208.133 million 1.
Figure 1. Subnational government expenditure as a
percentage of GDP
Revenues
At the end of 1990, the Law on Gmina Revenue was
passed, followed by the Law on Local Taxes and Fees at
the beginning of 1991. Gminas were guaranteed
independent budgets and revenues derived from their
own taxes, shares of income taxes (PIT and CIT), subsidies
and grants. Thus, at the very beginning of transformation
sub national governments were established as politically
and fiscally autonomous authorities2.
This autonomy was however limited, rights were quite
limited and have not been significantly extended. Still local
taxes and fees are centrally regulated and more than a
half of Gmina budgets come from the central budget in
the form of shares of income taxes (PIT and CIT) and
subventions. A small part of Gmina revenues comes from
grants. Figure 2 below pictures the relative importance of
different sources of income in sub national budgets. See
also Table A2 in the annex for more detailed data.
Figure 2. Sources of Gmina revenue
As seen from the Figure 2, the share of PIT and CIT
assigned to Gminas changed during the period under
investigation, and its relative importance in the sub
national budgets was also varying. One should note that
PIT and CIT are central taxes and Gminas have no right
to modify them. This is not quite the same for the local
taxes. The most important local tax is the area based
property tax. Gminas can alter this tax and other local
taxes and fees, although with quite significant limitations. In
recent years, some Gminas started to use their right in
this regard more extensively (for example by setting the
lowest or the highest possible fees) but still local tax
policies do not differ considerably.
The proponents of decentralisation claimed that Gminas
should freely decide how to spend their own revenues. In
practice, Gminas have some discretion in allocating money
from three sources: (a) their own revenues, (b) shares of
PIT and CIT and (c) funds transferred through the general
subvention. However, some obligatory payments have to
be made; a leading example of centrally set teacher
salaries that are one of the most important categories in
Gminas budgets. Shortly, Gminas can freely allocate funds
from these three sources if they fulfill their obligatory
payments.
As far as the subvention is concerned, more than 90% of
the general subvention received by Gminas is so called
‘educational subvention’ and the way it is calculated is
discussed at length in the subsection on education. At this
point it is worth emphasizing that despite the fact that
these funds are set according to the assumed costs of
education, they can be spent on other expenditures
because they are transferred through the general
subvention. Thus, they differ from the earmarked grants.
Differentiation of Gmina budgets
In assessing the effects of fiscal decentralisation on the
household well-being, the question of Gmina budget
differentiation is the most important one. Usually it is
assumed that due to decentralisation local authorities will
exercise their rights to determine revenues and
expenditures, trying to satisfy local preferences. In general,
3 The graph box summarizes data distribution by showing the distance between adjacent values (the vertical line segment) and the
25th and 75th percentile (the box). The horizontal lines within the box show the respective median. The longer the vertical line and the
box the more the distribution are spread. Notice that ‘rural/urban’ Gminas have been excluded in order to make the graph clearer; but
more data can be found in Table A4 in the statistical annex.
10
Poland looks like a quite decentralized country, given
relatively high total expenditures and a long list of sub
national responsibilities. But these figures could be
misleading. Some very important tasks are still regulated
centrally (again the best example is given by teacher
salaries) and most sources of Gminas revenues are also
centrally set, even if they are classified in the category
‘own’ resources. The essential issue here is that such
limitations could weaken the expected effects of
decentralisation.
The box plots on the Figure 3 below show differentiation
of Gminas’ total revenues per capita for 1996-2004,
separately for rural and urban Gminas 3 (see also Table A4
in the annex). It is easily seen that differentiation among
urban Gminas is much bigger. Obviously urban Gminas
differ from rural ones in expenditure assignment. But
while the variation of rural Gminas’ revenues was quite
the same during these years (with a noticeable change
between 1998 and 1999) the variation among urban
Gminas significantly increased. It is difficult to assess these
changes in general and to link them with the financial
situation of Gminas. This issue will be analyzed more
carefully in the next subsections discussing education and
health issues.
Figure 3. Gmina total revenues per capita 1996 - 2004
1.3 Decentralisation in education and
the reforms of 1999/2000
The Act on Local Government of 1990 stated that
preschool and primary education is the Gmina’s own
responsibility. The gradual process of overtaking primary
schools ended in 1996 but all the time Gmina schools
were financed on the basis of their previous costs. Only
the education reform of 1999 (which began in the school
year 1999/2000) implemented major changes. It modified
the organization of the school system and introduced
new ideas regarding curriculum development, school
assessment and teacher development. However, its
strongest impact on Gmina policies was due to the new
method of calculating educational subsidies from the
central government. A new financing scheme introduced
in 2000 had tremendous impact on many Gminas
because it was no longer based on historical costs.
Impact of Decentralisation
Thus, the year 2000 can be seen as a major shock which
really boosted decentralisation and forced Gminas to
think about schools in their area. In this subsection the
process of decentralisation and reforms of 1999/2000 are
overviewed.
Ownership and responsibility
As it has been already mentioned, Gminas were given
responsibility for preschool and primary education at the
very beginning of transformation. However, the central
government regulates teacher professional requirements,
contracts and salaries. In addition, it supervises schools,
defines curriculum and accepts textbooks. Local
governments (also powiats in the case of secondary
education) own schools and, in principle, they are
responsible for the way the educational services are
provided. It is important that in practice, Gminas‘ rights
are limited by law, the decisions of The Ministry of
Education and the high autonomy of school principals.
The law on local governments of 1990 declares that
primary education is the Gmina’s own task but the
transfer of ownership rights was postponed till 1996.
During the years 1991-1996 some Gminas took over the
responsibility for primary education and some city-
powiats took it over for secondary schools.
This gradual process is pictured in Figure 5, below. In
1996, ownership rights of almost all public schools were
finally transferred to Gminas. In 2005, 98% of primary
school students were at schools run by Gminas and only
0.2% of them were at schools owned by the central
government. There were also privately run schools, but in
2005 they served less than 2% of students (1% in schools
run by NGOs, 0.3% in schools with religious affiliation and
0.5% in schools run by other entities, mostly teachers or
private business).
Figure 5. Primary schools ownership
Financing
Non-obligatory preschool education is Gminas’ own task
financed from their revenues. Gminas set the network of
kindergartens in their area and can collect fees from
parents.
Obligatory elementary schools are still mainly funded
through the general subvention from the central
government. Reformers claimed that the central
government should provide Gminas with enough funds to
cover school running costs.
4 See detailed description of the reform process and political background in: Levitas, Herczyński (2002).
11
This was the assumption made during the development of
so-called subvention algorithm. In fact, various regulations
limit Gmina freedom in shaping their school costs (mainly
the fixed teacher salary scheme). On the other hand,
subvention is not an earmarked grant. As a result some
Gminas spend this money on a range of ends while the
others have to, or prefer to, spend additional funds from
their own revenues on education. Secondary schools are
financed on the similar basis. They are run either by
Gminas (lower-secondary schools) or by powiats (upper-
secondary schools).
The process of decentralisation of financing within the
education sector during the whole period of
transformation is presented in Figure 6. In 1990, all funds
were transferred from the central budget directly to
schools, but, recently, only a few percent of total
expenditures are allocated this way. At present, about two
third of the total expenditure is transferred to sub
national budgets through the general subvention. The
additional amount from the sub national governments’
own revenues is about 30%. Notice that while almost all
schools were already owned by Gminas in 1996, some
funds were still being transferred without using the
subvention. But after 1999, almost all funds for public
education are transferred to Gminas through the general
subvention.
Figure 6. Expenditures on kindergartens and schools
1990 - 2005
Allocating the subvention
Before 2000, Gmina schools were financed mainly on the
historical cost basis. In 1993, the new Law on Gmina
Finance was passed making the Ministry of Education
responsible for developing a special algorithm (rule) that
would allocate education subsidies to cover Gminas’
school running costs. There were various political and
technical difficulties in developing the algorithm4. Basically,
it was not possible to cover historical costs and at the
same time calculate the subvention that would consider
objective measures of school costs. Thus, before 1999 the
algorithm allocated funds to Gminas according to the
number of pupils, teachers and historical costs.
Importantly, despite the algorithm, there were ‘hold
harmless’ clauses which stated that the total subvention
for any Gmina should not be less than 100%, or more
than 110%, of the previous year’s subvention (inflation
adjusted). Therefore, many Gminas received subvention
based on historical costs.
Impact of Decentralisation
Per student cost differences between jurisdictions
remained dramatic and unjustified. Such allocation could
not be seen as ‘just’ and at the same it did not guarantee
the full coverage of teacher wages. The need for some
objective criteria in calculating subvention was quite
apparent.
In 2000, a new algorithm was introduced which was truly
based on a per-pupil formula. The most important change
was that now the ‘hold harmless’ clause said that
subvention per student (not the total amount of
subvention, as before) should be kept within a given
range. This made an important difference. Secondly, more
funds were allocated to powiats which had very limited
‘own’ revenues and were made responsible for upper
secondary education.
The algorithm, which in modified version is still in use
today, comprises several coefficients (weights) adjusting
the amount finally allocated. The most important weight
regards students in rural schools and it reflects higher
average costs of service provision in rural Gminas.
However, this weight coefficient is changed almost every
year according to political spectrum of representatives of
urban and rural Gminas5.
Obviously, development of the algorithm based on the
measures of objective costs should be supported by
legislation defining the minimum and maximum classes or
school sizes, teacher/student ratios, teacher salaries,
normative employment and other basic standards of
service provision. Only teacher salaries are centrally fixed
but other standards have not been stated until now. This
makes the whole system problematic, because teachers’
salaries are not reflected in the algorithm. Thus, the system
is seen by many as an unfunded mandate because some
Gminas have to cover rising wage costs with very limited
means of adjustment.
Gimnazjum
Another important change introduced by the 1999
education reform was the establishment of ‘gimnazjums’,
i.e. the lower secondary school run by Gminas. In 1999,
the first student cohort went to the first grade of
gimnazjum instead of the seventh grade of primary
school. Since 2001, all students financed by Gminas were
in 6-year primary school or 3-year gimnazjum, while
students financed by powiats were in 3 or 4-year upper-
secondary school. The implementation of a lower-
secondary school had to guarantee a better quality of
education because gimnazjums were less numerous,
bigger and better equipped than primary schools. The
common belief was that small primary schools in rural
areas are of poor quality and that gimnazjums create an
opportunity to collect students from wider areas, thus,
improving efficiency, that is lowering overall costs and
enabling investments that might allow a rise in the quality
of teaching.
5 At the same time the category of ‘rural’ Gminas is very mixed. Some rural Gminas are quite rich (e.g. Gminas in the Warsaw
agglomeration or Gminas where huge mining companies are placed). There is also a large group of rural Gminas with very limited
sources of their own revenues. Thus, it is claimed that the educational subvention algorithm is not really based on objective categories,
and this put some Gminas into financial troubles (see detailed analysis in: Swianiewicz et al., 2005; Jakubowski, 2006).
6 See Table A5 in the annex displaying data on the number of schools, students and class sizes.
7 In 1999, four reforms – called major reforms – were implemented: territorial (administrative), pension, health care and education.
12
Concluding remarks on education reform
Surely, changes introduced in 1999/2000 had a significant
impact on Gmina budgets, as well as on accessibility,
efficiency and perhaps on quality of educational services.
Some Gminas have seized the opportunity to reorganize
the school network and teacher employment while
others have not6 (see Table A5 in the annex with data on
the number of schools, students and class sizes). Clearly,
before 2000 the majority of Gminas did not care about
school costs because they were almost fully covered by
the central budget. After 2000 many of them, especially
rural ones, tried to reorganize the school system in their
area. Thus, one can legitimately say that the most
important wave of decentralisation began in 2000.
1.4 The Decentralisation and health
reform of 1999
From the beginning of transformation it was quite
obvious that the post-soviet health care system had to be
reformed. For many years, however, there was no political
commitment to reform the system despite its growing
ineffectiveness. Several of the competing proposals were
not fully put into action, although the need for a
comprehensive reform was clear. Finally, in 1999 the
government found support for the whole package of
reforms. 7 Among them, the health care reform was one of
the most important.
Main features
The reform changed financing from budgetary into
insurance based, establishing health insurance contribution
levied on individual incomes (with a few exceptions,
regarding farmers, for instance). It introduced 17 public
regional health insurance funds called Sickness Funds
(“Kasy Chorych”) – later transformed into one National
Health Fund (“Narodowy Fundusz Zdrowia”) – and made
them responsible for contracting health services. It also
introduced a purchaser-provider split, and increased the
role of private providers who have clearly been given the
possibility to contract for public services. As in the past,
most health services remained financed from public funds
while the cost of medications remained co-financed by
individuals. Contrary to earlier proposals, the 1999 reform
left small room for sub national government activity, which
is described below. Nevertheless, this reform could be
seen as an example of state devolution rather than
decentralisation based on giving more power to local
jurisdictions.
As already mentioned, the health reform of 1999 was not
the first attempt to decentralize (or devolve) the system.
Early acts regulating local governments indicated the
health care among Gmina responsibilities. However,
contrary to the case of education, involvement of Gminas
into the provision of health care services was not only
postponed but remained very low and even diminished in
recent years.
Impact of Decentralisation
In 1998, reformers planned to give more responsibility in
this area to powiats, but finally, health insurance funds
took over the task of financing and contracting health
service providers. Clearly, the role of Gminas in the health
sector after 1999 has been very limited. The financial role
of powiats and voivodships is also of limited importance,
but these sub national governments were made founding
bodies of local and regional hospitals.
Public expenditure
Assessment of health expenditures is a complicated and
sometimes-controversial task with opposing ideas of what
should be considered as ‘health expenditure’. According to
the budgetary statistics, this category consists of spending
on health care, public health and social care. Figure 7,
below, uses a budgetary concept to straightforwardly
assess sub national health expenditures. It shows total
health expenditures (in constant 1996 prices) - grouped
into a relevant budget category of sub national
governments - in per capita terms, and as a percentage of
total expenditures.
The share of health expenditures from the total amount
of sub national governments’ expenditures is small and
diminishing (6% - 3%). Clearly, expenditure on health care
is more important in powiat and voivodship than in
Gmina budgets. In 1998, Gminas spent more than 5% on
health but after 1999 this share went down to less than
5%. In recent years, these figures became even smaller.
It may be useful to see the health expenditure structure
at various levels of sub national governments. Statistics
show that powiats and voivodships spend about 50% of
their health expenditures on hospitals. Additionally
powiats spend as much as 40% on paying health fund
fees, mainly for unemployed (which was a delegated task
of the central government). Voivodships spend additional
funds on medical rescue and education. In 1999, Gminas
(except city-powiats) spend less than 2% on hospitals,
about 13% on outpatients care, 14% on health funds fees
and about 50% on anti-alcoholism programs.
In 2003, Gminas (except city-powiats) spent nothing on
health fund fees (the task completely delegated to
powiats), 7.5% on hospitals, 9% on outpatients care and
77% on anti-alcoholism programs. City-powiats’ health
expenditures structure reflects mixed responsibilities of
Gminas and powiats in this regard8.
8 Based on the BDR data (Central Statistical Office) and Ministry of Health (2004).
9 In the last section they will also be compared with overall household expenditures.
10 The data presented here are taken from Ministry of Health (2004). See also annual publications “Narodowy Rachunek
Zdrowia” (Central Statistical Office).
13
Figure 7. Subnational governments’ health expenditures
The role of sub national governments in the health system
can be seen more clearly through a comparison of the
total public expenditure with spending of sub national
governments. 9 Such a comparison is difficult because of
intergovernmental transfers and double payments
between different public agencies that should be carefully
excluded.
The calculations presented below are based on the
methodology developed by the OECD (System of Health
Accounts) and is used in the official Ministry of Health
and Central Statistical Office reports 10. Table 1 collates the
amount of total running costs of the health systems
financed from different public sources: central and sub
national governments, health insurance funds collecting
contributions from their employees (Kasy Chorych and
later Narodowy Fundusz Zdrowia, NFZ/KCH) and social
insurance funds (Zakład Ubezpieczeń Społecznych, ZUS
and Kasa Rolniczych Ubezpieczeń Społecznych, KRUS),
which contribute for persons not paying the health
contributions on an individual basis (i.e. for the
unemployed and for farmers).
While other attempts were made to assess the financial
role of different public actors in the health care system
giving slightly different numbers, they have similarly proved
the minor financial role of sub national governments (see
Kowalska, 2006; Surówka, 2004). Thus, the methodology
applied in the analysis of decentralisation should be
treated as an example of possible ways to analyze changes
in the health system. Full analysis of decentralisation,
system devolution and privatization could similarly
investigate regional variations in expenditures of the
National Health Fund, as well as, accessibility of services.
This could have a more significant impact on households.
Impact of Decentralisation
Table 1. Current
health system costs central sub national Social Security
year NFZ/KCH
covered from public government governments Funds
sources.
Source: billions of PLN, 1999 constant prices
„Finansowanie
ochrony zdrowia w
1999 22651 2399 838.6 23785.5
Polsce – Zielona
Księga” (Ministry of
Health, 2004) 2000 21546.1 2024 907.1 22721.9

2001 23685.2 2029 911.2 24998.8

2002 25269.6 2155.8 639.5 26463.2

2003 25005 2038.9 637.6 25982.3

Health sector reforms

1.5 Summary
Although reforming the old Soviet health sector was quite
This chapter discussed the background of the Polish necessary, it took until 1999 for government to commit.
decentralisation process and introduced the four The reforms in the health sector consisted of different
elements of this study. elements; quite a few of them fall outside the context of
this study. Furthermore, one has to take into account that
Decentralisation, public services and Gminas the role of sub-regional government is limited and that
The process of decentralisation was part of a complete Gminas expenditure on health care is minimal. Due to
transformation of the country and was inspired by various these limitations, the study of the effects of
motives. This study focuses on the effects of decentralisation in the health care sector only serves a
decentralisation on Gminas, due to their crucial role in methodology purpose in this paper.
public service provision.
Fiscal Data
This study uses fiscal data to describe and analyze the
process of decentralisation; therefore, one has to take into
account the institutional arrangements regarding this
subject. In the case of Poland this gives a mixed picture.
On the one hand, Gminas have fiscal autonomy and as
long as Gminas fulfill their obligatory tasks they can spend
money how they seem appropriate However, there are
still structural centralized elements in place within the
overall system of fiscal relations. This limits Gminas’
freedom and this will have to be taken into account when
looking at the overall effect of decentralisation.
Educational Sector Reforms
Reforms within the educational sector started already in
the early nineties, but only commenced to have an impact
with the 1999 / 2000 reform, when a new system for
subsidizing education was introduced. Gminas are
responsible for pre-school and primary education and
most primary schools are owned by Gminas. The system
is financed mainly through general subvention from
central government. However, preschools are financed by
Gminas from their own budget.
Prior to the 2000 reforms, financing of primary schools
was based on historical cost. The 2000 reforms
introduced a financing algorithm that was truly per-pupil
based (with some adjusting coefficients). This reform
motivated Gminas to make changes in the way they
managed their schools. However, the system (i.e. the
algorithm) has a structural flaw for not taking into account
the teachers’ salaries, which are still determined centrally,
but paid locally.

14 Impact of Decentralisation
 Research
This Section

This section focuses on the impact of decentralisation

within the educational sector and health sector, with the
latter serving only a methodological purpose. Impact of
decentralisation is defined in terms of accessibility,
efficiency and equity; in addition, it is quantified with
proxies.
Education
Accessibility is measured in terms of the number of
schools and in terms of enrollment rates. Efficiency
involves the analysis of costs and expenditures. Equity
relates to poverty and inequality investigations.
Health

Perspectives
Impact is analyzed through the perspective of Public
Spending, or Household Spending and in some cases a
combination of the two are used.
Data
Additional detailed information regarding year coverage,
methods of the investigation and data sources can be
found in the Methodological Annex

Contents
2. Education and Accessibility
3 Education and Efficiency
4 Education and Equity
5 Health, Efficiency and Equity

15 Impact of Decentralisation
 2 Decentralisation and
Educational Accessibility
This Chapter In Table A5 data on the number of schools and students
are presented. Also, proxies of the average class size are
This chapter focuses on the impact of decentralisation displayed, and one can easily calculate an average school
within the educational sector in terms of accessibility. The size. It can be seen that during the whole period under
chapter starts with looking at general Gminas statistics investigation the number of primary schools declined
and then continues with a more in dept look at significantly, with the greatest change in 1999-2001 when
household spending, for the latter a probit function will be a lower-secondary school (gimnazjum) was established.
used. Despite school closure, average school size considerably
Accessibility is measured in terms of the number of decreased due to population decline. Also, following this
schools and in terms of enrollment rates. decline, a moderate decrease in average class size is
noticed. At the same time, the number of newly
Given Gminas responsibilities in the education sector, established gimnazjums was much smaller following the
special attention is paid to preschool and primary much smaller number of students.
education.
While one can claim that a decrease in school and class
Contents sizes could positively affect teaching quality the same can
not be said about accessibility. A lower number of schools
2.1 Education, Accessibility and Gminas’ statistics. mean that they may be far away from students’ homes
2.2 Education, Accessibility and Household / Public limiting education accessibility for school users.
Spending This is crucial in rural areas but can also be of importance
2.3 Summary in cities, especially in the case of younger students. The law
states that the Gmina has to organize free public
2.1 Education, Accessibility and Gminas’ transport to schools, but in practice transport services
statistics offered by Gmina could be of very poor quality. Some
students in rural areas have to commute for more than
Primary and lower secondary education one hour to get to the school. Additionally, the majority
of them who live outside of a village where school is
Primary and lower-secondary schools are obligatory in placed have very limited access to additional, non-
Poland. More than 98% of inhabitants in a relevant age obligatory school activities, libraries and cultural events.
attend them. Thus there is no point to analyze enrollment
at these levels. On the other hand, reorganization of the The fact is that school transport is a Gmina’s own task,
school network resulting from the 1999/2000 reform which has to be financed from its own resources. While
(school closure and busing) involved important problems during the reform the central government made some
regarding the number of schools, especially in rural areas. promises of support in this regard, now the entire burden
is on the Gmina. Thus, this element of reform could be
seen as an unfunded mandate
number of students Table A5. Number of
number of schools average class size
(in thousand) schools, students and
school year
average class sizes
primary gimnazjum primary gimnazjum total primary gimnazjum
Source: Annual
95_96 19823 - 5104.2 - 5104.2 22.0 - publications “Oświata i
wychowanie” and BDR
96_97 19537 - 5012.9 - 5012.9 21.9 - data, Central Statistical
Office. Class sizes
97_98 19299 - 4896.7 - 4896.7 21.7 - calculate per budgetary,
not the school year.
98_99 19096 - 4741.5 - 4741.5 21.8 -

99_00 17743 6121 3958 615.3 4573.3 21.2 24.6

00_01 16766 6295 3220.6 1189.9 4410.5 21.1 24.6

01_02 15836 6423 3105.1 1743.1 4848.2 21.2 24.9

02_03 15593 6609 2983 1709 4692 20.9 25.0

03_04 15344 6927 2855.6 1681.2 4536.8 20.6 25.0

04_05 14765 6980 2723.7 1648.8 4372.5 20.4 24.9

05_06 14572 7031 2602 1596.8 4198.8 20.1 24.7

16 Impact of Decentralisation
Some researchers claimed that the reform, the Additionally, participation levels in rural Gminas are still
establishment of the gimnazjum and the reorganization of much lower than in urban areas (16-18% depending of
the school network will benefit students because overall the year comparing to 36-38% respectively). Thus, most
efficiency will increase and saved funds will be invested Gminas did not seize the opportunity created by
into quality raising policies (see Levitas, Golinowska, population decline, which was to keep the existing
Herczyński, 2001). Others emphasized that the reform network of preschool education institutions and improve
was deeply based on stereotypes of small rural schools participation levels. The data shows that in many Gminas
with poor teaching quality, and that extending students the exact opposite happened. The percentage of Gminas
distances to school and closure of rural schools have a with kindergartens decreased from 82% to 78% (73% to
negative impact on students and their rural communities 66% in the case of rural Gmina). Most Gmina kept their
(see Jakubowski, Kozińska, 2005). support for zero classes probably anticipating a new bill
that made zero classes obligatory for 6-year-olds (which
Preschool education finally became law in 2004). However, there is still room
As already mentioned, many experts and practitioners for a significant increase in participation levels of children
believe that accessibility of preschool education is the aged 3-5.
most important policy issue (see Zahorska, 2003). The Figure 8. Percentage of 3-to-5 years old in kindergartens
Regional Data Bank offers the best indicators for the
analysis of preschool statistics. Table A6 below shows
detailed data on kindergartens and ‘zero classes’. The
number of kindergartens and kids at kindergarten
gradually decreased in 1995 - 2004. This is not surprising
bearing in mind that it was the period of heavy population
decline (see Table A7 in the annex for demographic data).
However, note that the number of Gminas running
kindergartens also declined. The same is not true
regarding zero classes. While the number of kids in zero
classes decreased and the number of schools with zero
classes was also lower in 2003 compared to 1998
(remember that the overall number of primary schools
also declined) the number of Gmina providing zero
classes was quite stable during the period.
Table A6. Data on kindergartens and schools with zero
classes Source: own calculations based on the data from
BDR, Central Statistical Office. The common view among experts is that preschool
These data are better summarized with participation rates education is one of the most effective tools in decreasing
rather than absolute values. It is well known that equity in education systems or, in other words, in
participation in preschool education among 3-5-year-old enhancing educational opportunities for children from
children is very low. Figure 10 below characterizes the disadvantage or poor families. Data analyzed here show
distribution of preschool participation levels in that preschool participation levels remained almost the
1998-2003, for rural and urban Gminas, separately. Note same regardless of population decline. More importantly,
that the data on the graph represent the population of many Gminas closed their kindergartens, with some of

number of number of number of number of number of

number of
year kids in Gmina having kids in zero schools with Gmina having
kindergartens
kindergartens kindergarten classes zero classes zero classes
1995 768868 9245 2070 211312 11268 2133
1996 758690 9032 2045 220423 11491 2173
1997 751307 8900 2035 225556 11600 2180
1998 736584 8834 2035 217470 11514 2176
1999 717586 8668 2011 199506 10152 2126
2000 686056 8430 1981 196783 9502 2117
2001 653630 8103 1953 192535 9162 2124
2002 645219 7941 1938 192963 9191 2121
2003 640272 7789 1931 189482 9134 2136

Gmina and are not the relevant averages for student
population (see also table A10 for data on children
population). Overall participation of 3-5-year-olds and
3-6-year-olds slightly increased but still remained at a very
low level.
them completely resigning from providing such services in
their area. In effect, inter-Gmina variations in preschool
accessibility slightly increased, with some dramatic regional
differences11.

11 In opolskie voivodship abort 51% of 3-5-year-olds use kindergartens while in podlaskie voivodship only 26%.

17 Impact of Decentralisation
Findings
To sum up this point we should emphasize that
decentralisation has no positive impact in this regard and
while the situation is not getting worse the level of
participation in preschool education in Poland remains
one of the lowest among OECD countries (see OECD,
Education at the Glance). Increasing financial burden on
Gminas and the non-obligatory nature of kindergarten
expenditure forced many Gmina to completely withdraw
from providing education services for 3-5-year-olds. Partial
and inadequate central government policies did not
change the situation12. Surely, decentralisation will have a
negative impact in this regard if Gmina will not be
supported by financial transfers.
2.2 Education, Accessibility and
Household /Public Spending
Preschool enrollment probit analysis
Household budget data allow for studying the impact of
decentralisation on the access to education through the
enrollment indices. Certainly, the analysis of the average
enrollment rate at various levels of education (preschool,
higher secondary) as well as its distribution across
households with different standards of living might be
interesting..
But HBS combined with BDR data may be used in yet
another way, more fruitful from the point of view of the
main purpose of this study. This may be done using
econometric methods, in this case probit analysis. Probit
functions help establish determinants of the probability of
some event. In this research, it has been applied in order
to measure the impact of Gmina preschool expenditures
on the preschool enrollment rate (more precisely – on
the probability of sending a child to a kindergarten), both
before and after the 1999 decentralisation. Accordingly,
probit functions of preschool enrollment with a special set
of regressors were estimated for the years 1998 and
2003, and then for the pooled data set 1998+2003.
Since the main question addressed regards the impact of
decentralisation (here: decentralisation of 1999), it has
been operationalised through the use of a combination of
three regressors in the probit function: Gmina
expenditure, the household poverty indicator and the
year indicator (the latter for the pooled data exclusively).
Statistically significant coefficient of the Gmina variable –
especially when mixed with the year and/or poverty
indicators – may be interpreted in terms of the
decentralisation impact on the dependent variables of the
probit.
In general, two hypotheses have been tested with the use
of this approach. First, Gmina’s expenditure on
kindergarten has a positive impact on the enrollment,
although this impact may differ for the poor and the non-
poor populations. Quite possibly, the non-poor are more
responsive to the Gmina fiscal policies regarding
preschool education.13 Second, the decentralisation of
12 Many sees obligatory zero classes as an inefficient and ineffective policy which forces all families to send kids to schools while for
many of them it is not really needed. Strictly, in the situation of fiscal stress, preschool support should be concentrated on poor or
disadvantaged families that have no possibility for preschool education, and who need it most.
13 Empirical arguments for this hypothesis may be found by the examination of the preschool enrollment figures by the house hold
consumption quintile – see Annex Table ATE1.
14 See Methodological Annex for more information on poverty measurement and on poverty rates in 1998 – 2003.
18
1999 might have changed the strength of the Gmina’s
influence on the enrollment rate because Gminas became
free to adjust their expenditures to the local needs.
However, one shouldn’t expect that a spectacular change
has occurred regarding preschool enrollment. In fact, the
education reform of 1999 did not involve kindergarten,
and only an indirect impact of the 1999 decentralisation
reform may possibly be visible.
Probits were run on the HBS sub-sample restricted to
households with children at the ‘preschool age’ (age 3 to
6). The dependent variable was set as Probit
(enrollment=1). Enrollment equal to 1 was set for
households spending on kindergarten, and it was set equal
to 0 for households with zero expenditure.
Given the data available and the general knowledge
regarding family behavior, the following variables have
been chosen as ‘regular’ determinants of the probability
of having a child at a kindergarten: place of residence
(dummy, urban=1, rural=0), number of children at the age
3-6, number of adults 18+ who can take care of a child
( i.e. non working, except agriculture, and not at regular
school), education of the household head (through four
dummies), and per capita household expenditure
indicating the standard of living. As it has been already
mentioned, additional variables have been introduced as
well. Gmina expenditure has been measured as average
spending on kindergarten per child at ages 3-6, in 73
territorial units (data from BDR).
The poverty variable (poor) has taken the value of 1 for
every household considered as poor, i.e. whenever its
equivalent expenditure has been lower than 60% of the
1998 median (kept constant in real terms)14 . For the
pooled regressions, the year indicator (variable year 03)
has been set equal to 1 in 2003 and 0 in 1998.
All expenditure variables have been expressed per
month, in constant 1998 prices (CPI deflator has been
used) whenever the probit regression was run on a
pooled data set, and they were expressed in current
prices otherwise. Data has been weighted using
household weights provided by GUS (not adjusted).
Findings
Results of the probit function estimation for two separate
years are displayed in Table 2 (one version for 1998 and
two for 2003), and for pooled data sets in Table 3 (three
versions). Annex tables show estimation statistics in more
detail.
Impact of Decentralisation
Results displayed in Table 2 are reasonable from both Coefficients of Gmina’s expenditure are almost identical
statistical and methodological points of view. Estimators of for 2003 and 1998 probits. However, no conclusion can
all parameters are significant (exception, place of be drawn from this result because expenditure variables
residence in 2003, see 2003 column (1), excluded in the are in current prices for these runs. Also, statistical tests
version (2)) and all carry a proper sign (say, plus for the for the two separate probits involve problems. These
number of non-working adults, for household expenditure problems can be solved by means of the pooled data sets.
variable etc). The only statistical deficiency is the level of Probit results received from the pooled data (1998
pseudo-R2, indicating that a goodness of fit is quite low. +2003) using constant prices clearly show that there have
This is not surprising, given the data set (individual not been any important changes as far as the impacts of
households), the type of function (probit), and the way the Gmina variables’ between 1998 and 2003. This may be
regressors have been introduced (many dummies). seen through the analysis of the coefficients displayed in
Results of probit regressions for preschool the column (1) of Table 3 below and in Annex Tables
enrollment, 1998 and 2003 ATE4prob and ATE7prob - ATE9prob. Gmina’s
expenditure (variable Gmina exp) combined with the
Table 2. year indicator (year03) is NOT significant. The same is
found for the combination of these variables with
Dependent variable: 1998 2003 2003 household pover ty indicator (see variable
Probit (enroll=1) (1) (1) (2) year03*poor*Gmina exp). Both can be excluded from the
urban 0.210 0.079 xx
set of regressors of the probit function, with no effect on
main statistics (compare column (1) and (2) of Table 3).
nof hh members age
3-6 0.210 0.151 0.148
nof nonworking hh
members -0.360 -0.209 -0.215 Table 3.
Education: high 0.304 0.249 0.254 Results of probit regressions for preschool
E d u c a t i o n : enrollment, 1998+2003
secondary 0.245 0.099 xx 0.104x
1998+2003 coefficient
hh exp pc 0.000 0.000 0.000 Dependent variable: estimates
Gmina exp pch 0.003 0.003 0.003 Probit (enroll=1)
(1) (2) (3)
poor*Gmina exp
pch -0.003 -0.002 -0.002 urban 0.153 0.149 0.390
nof members age 3-6 0.181 0.180 0.154
_cons -1.383 -1.507 -1.496 nof nonworking hh
members -0.278 -0.278 -0.301
Education: high 0.289 0.290 0.375
Number of obs 4616 3809 3809
Education: secondary 0.178 0.179 0.220
LR chi2(df) = 696.22 645.42 645.42 hh exp pc 0.000 0.000 0.001
Pseudo R2 = 0.146 0.156 0.156 Gmina exp pr 0.003 0.003
poor*Gmina exp pch -0.003 -0.003
Log likelihood = -2036.02 -1752.03 -1752
year03*Gmina exp pch 0.000xx
Note: year03*poor*Gmina
exp pch 0.000xx
All non-tagged coefficients are significant at less than 1% year03 0.126
level. Coefficients marked with x are significant at 10%. _cons -1.432 -1.435 -1.302
Coefficients marked with xx are not significant (P for z
variable > 10%). Highlighted are variables/coefficients of Number of obs 8425 8425 8425
special interest. Exp stands for expenditure, pc for per capita; LR chi2(df) = 1322.8 1322.57 1153.8
pch stands for per child age 3-6. HBS sample is restricted to Pseudo R2 = 0.148 0.148 0.129
households with children 3-6. See Annex tables for detail.
Log likelihood = -3807.4 -3807.5 -3891.84
Source: Note:
HBS + BDR, own computation. All non-tagged coefficients are significant at less than 1%
level. Coefficients marked with x are significant at 10%.
Coefficients marked with xx are not significant (P for z
For the purpose of this study, the most important is the variable > 10%). Highlighted are variables/coefficients of
estimate of a Gmina’s expenditure coefficient: for the special interest. Exp stands for expenditure, pc for per
capita, pch for per child age 3-6. HBS sample is restricted to
Gmina exp variable alone as well as combined with households with children 3-6. See Annex tables for detail.
poverty indicators. First, notice that this coefficient is Source:
positive in both years under investigation for Gmina HBS + BDR, own computation.
expenditure variable, but it is negative for this variable
combined with the poverty indicator (Tables 2 and Annex Nevertheless, the difference of the preschool enrollment
Tables). This means that each year the higher the spending between the two years is significant, although it is
of Gminas the higher preschool enrollment rate, or - irrespective of the Gminas’ fiscal policies. The third (3)
strictly speaking - probability of sending a child to a version of the probit function displayed in Table 3 shows
kindergarten. However, this impact was much weaker or positive and statistically significant coefficient of the year03
even negligible for the poor households (the sum of the variable. Such a result is not surprising.
coefficient discussed is lower, close to zero). This finding
seems important from the point of view of effectiveness
of local policies in the education sector.

19 Impact of Decentralisation
As already mentioned, there were not any major changes
(decentralisation) of Gmina’s policies regarding preschool
education between 1998 and 2003, and evidently the
increase of the enrollment rate in 2003 as compared with
1998 (not very pronounced) cannot be attributed to such
a change.

2.3 Summary

Impact by proxy
The impact of decentralisation on the educational
accessibility is measured through the proxies of number of
schools and enrollment rate. The study within the
educational sector focuses on preschool and primary
education.
Number of Primary Schools
Information regarding the number of schools is derived
from Gimnias’ statistics. With respect to primary
education there is a significant decline in the number of
schools, however two other occurrences apart from
decentralisation are involved; the first is an overall decline
of population, the second is the establishment of
gimnazjums. A lower number of schools in general
negatively effects educational accessibility in rural areas,
because the students have to travel greater distances
while suitable transport is not always available. An added
constraint is that school transport is funded out through
Gminas’ own limited budget.
Number of pre-Schools
Accessibility to preschool education is an important policy
issue, because it promotes equality. Furthermore, it is of
particular interest for this study because preschool
education is a voluntary task of Gminas and differentiation
among Gminas could indicate an effect of
decentralisation. In respect to preschools numbers, data
analyzed show stable preschool participation levels even
with a declining population. More importantly, many
Gminas closed their kindergartens, with some of them
completely resigning from providing such services in their
area. In effect, inter-Gmina variations in preschool
accessibility slightly increased, with some dramatic regional
differences..
Enrollment rate
Primary and lower-secondary schools are obligatory in
Poland. More than 98% of inhabitants in a relevant age
attend them. Thus there is no point to analyze enrollment
at these levels.
Preschool enrollment
In respect to preschool enrollment rate a probit function
was used to measure the impact of Gmina preschool
expenditures on the preschool enrollment rate, hereby
using both the data from public and household
expenditures. The probit function showed that the higher
the spending of Gminas the higher preschool enrollment
rate, or - strictly speaking - probability of sending a child
to a kindergarten. However, this impact was much
weaker or even negligible for the poor households (the
sum of the coefficient discussed is lower, close to zero).
This finding seems important from the point of view of
effectiveness of local policies in the education sector.

20 Impact of Decentralisation
21 Impact of Decentralisation
3 Decentralisation and
Educational Efficiency
This Chapter
As it has been mentioned, efficiency impact is examined
with the use of expenditure proxies. In chapter 2, some
data on public expenditure on education were already
discussed. They regarded overall expenditure but certainly
more detailed analysis is needed in order to assess
efficiency impacts of the 1999/2000 reforms. Such an
analysis is presented below.
This chapter will start of with a more in depth analysis
into public spending on education, it then will compare
changes in public expenditures with those occurred in
household spending. Whether decentralisation has
influenced household expenditures on education subject
of the last sections of this chapter.
Contents
3.1 Education, Efficiency and Public Spending
3.2 Education, Efficiency and Household - Public
expenditure compared
3.3 Education, Efficiency and Household spending
3.3.1 Change of household education
expenditure in 1998-2003
3.3.2 Regression analysis of household
expenditure on education: 1998, 2003
3.3.3 Regression analysis of household
expenditure on kindergarten: 1998, 2003
3.4 Summary
3.1 Education, Efficiency and Public
Spending
Overall per student expenditure
This part of the investigation relies on education
expenditure expressed per student. Notice that, since
direct quantitative measures of teaching quality are not
available for the period covered by the research and
external examination system which launched only in
2002, per student expenditure may also be treated as a
proxy measure of service quality.
Figure 8 below and Table A8 in the annex show changes
in Gmina educational expenditure per student for
1998-2003.
15 Please note that the kindergarten expenditure in 2001 was in a different budgetary category (“edukacyjna opieka wychowawcza” –
educational care), but in the analysis presented here we added this expenditure to total education expenditure and to preschool
expenditure to make it comparable between years. However, we were not able to do that in the case of running costs because the
Central Statistical Office is not reporting kindergartens’ running costs. Thus, they were calculated as a per capita cost for the relevant
population of students in a particular year.
22
Figure 8. Gmina education expenditure per student
It is clear from Figure 8 that average Gmina expenditure
(in constant prices) was higher in 2003 than in 1998,
however, the year-to-year change over the whole period
was not steady. After the major change in the way of
calculating educational subvention was implemented in
2000 (see section II.C for detail) and the final
establishment of gimnazjum in 2001, education
expenditure per student first decreased, and then started
to gradually increase again. In fact, despite the population
decline throughout the period, the number of students in
schools run by Gmina was at its peak in 2001-2002 (see
table A5 in the annex). This is because together with the
introduction of gimnazjum, obligatory comprehensive
primary and lower-secondary education was extended by
one year. In 2001, Gmina schools served a population of
7-15 year olds instead of 7-14 year olds. It seems that the
education reform temporarily decreased the average
expenditure per student. One could claim that this
affected the quality of teaching, but no direct test of such
hypothesis is possible here.
Per student expenditure by education level
Table A8 below summarizes data on the average
education expenditure per student in several categories.
One should treat data on primary and lower-secondary
school expenditure in 1999-2001 with great caution,
keeping in mind that newly established gimnazjum were
often ran in buildings shared with primary schools and
served by the same staff. In practice it was a choice of
reporting persons to a category in which a particular cost
was assigned (e.g. physics teacher’s salary who worked in
both schools and cost of building heating). Thus, for this
period it is better to look at total school expenditure
which sums the data for primary and lower-secondary
school.
The most reliable way of assessing changes of per student
expenditure in 1998-2003 is to use statistics that regard
the following categories 15: total education expenditure,
total running costs, school expenditure (primary plus
lower-secondar y) and preschool expenditure
(kindergarten plus zero class).
Impact of Decentralisation
Notice that while expenditures on schools lowered in First, the new education subvention algorithm based not
2001, this was not the case for preschool education. on historical but on objective costs decreased variation.
Overall spending on preschool education was gradually Second, the increase in the number of students in Gmina
increasing during the period without any major schools lowered the average spending (which, in fact, is
breakdowns. Expenditures on ‘zero’ classes were even also due to the new per-pupil based algorithm). Third,
higher in 2001 than before. This latter finding should be Gminas took the chance to reorganize the school
treated with caution because of the reorganization of the network, increasing system efficiency. Probably, all these
whole school system and the different data sources that explanations are partially true. One needs to go into a
have been used for expenditure computations 16. detailed analysis of Gmina expenditure and school
Differentiation of per student expenditure organization to distinguish between these explanations.
Another important question is whether reforms increased
or decreased the differentiation of Gmina expenditure in
different categories. Table A9 in the annex gives a few
statistical measures of between-Gmina variation in
average expenditure. These data are also summarized in
Figure 9 below (all in 1998 constant prices). It can be seen
that while between-Gmina variation in average school
expenditure per student lowered after 2000, the opposite
happened with preschool expenditure. Clearly, after 2000
both total school expenditure per student and its
variation significantly decreased. This can be explained in
several ways.
Table A8. Gmina expenditure on education
Kindergarten expenditure was excluded in this category in
2001-2003
Source: own calculations based on the data from BDR,
Central Statistical Office

total exp total current primary

gimnazjum kindergarten zero class
preschool:
exp school (1)+(2)
year per child/ exp per exp exp per
per child/ exp per exp per
student student per child child
student* student child

(1) (2) (3) (4) (5) (6) (7)

1998 constant prices
1998 2948.1 2336.0 2782.9 - 2786.7 1528.8 2228.8
1999 3198.9 2631.7 3249.0 - 2994.9 1871.2 2436.2
2000 3476.9 2964.3 3598.5 - 3219.9 1973.9 2614.1
2001 3189.1 2475.6 3324.6 2420.2 3062.0 3101.3 2674.6
2002 3373.8 2641.5 3327.8 2934.0 3315.7 2065.1 2619.4
2003 3608.8 2905.3 3592.0 3057.1 3501.7 2342.8 2825.1
nominal prices
1998 2948.1 2336.0 2782.9 - 2786.7 1528.8 2228.8
1999 3432.4 2823.9 3486.2 - 3213.6 2007.8 2614.0
2000 4106.2 3500.9 4249.8 - 3802.7 2331.2 3087.2
2001 3973.6 3084.6 4142.4 3015.6 3815.2 3864.2 3332.6
2002 4284.7 3354.8 4226.3 3726.1 4210.9 2622.7 3326.7
2003 4619.3 3718.7 4597.8 3913.1 4482.2 2998.8 3616.1

16 Another thing is that preschool expenditures in 2001-2003 were taken not from the BDR database, where they were not collected for
these years, but from the Ministry of Finance database (MF). Both sources give the same amount of total expenditure on kindergartens
and zero classes, but according to the MF data in 2001 the number of Gmina with positive spending on zero classes increased by more
than 300. At the same time BDR data show no pupils in zero classes for several Gmina with positive spending noted in the MF
database. Thus, we assumed that if overall spending is the same, one should aggregate expenditure on kindergarten and zero classes
to analyze them together. This way mistakes caused by different budgetary nomenclature could be avoided.

23 Impact of Decentralisation
Figure 10. Gmina expenditure on school and preschool
education
Findings
It is hard to evaluate the overall effect of the reform and
how it relates to decentralisation. From one point of
view, decreased variation could be seen as a positive sign
of greater equity. On the other hand, the expected effect
of decentralisation is an increase in variation because of
the greater freedom in allocating resources which could
raise cost-effectiveness. Another argument states that the
new subvention algorithm based on objective needs
motivated local governments to use resources more
efficiently. But one can also claim (and this is a very
popular claim among local government representatives)
that the new algorithm increased the financial burden on
Gminas which were not able to sustain expenditure
levels. This could negatively affect quality but, as already
mentioned, such a hypothesis is hard to test in a direct
way.
A quite different story can be said about preschool
expenditures which grew almost monotonically over the
period. In fact, the 1999 reform has not considered
preschool education. Obviously, the expenditure variation
is bigger in the case of preschool than primary education
because this sub-sector was in fact completely
decentralized 15 years ago. However, this variation has
rapidly increased after 2000. One possible explanation is
that the ‘shock’ in 2000 caused by the introduction of the
new financing scheme and by the reorganization of the
school system increased budgetary pressures on Gminas,
especially in rural areas. While some Gminas tried to keep
preschool services in their area and to finance them on
similar levels as before, others were trying to limit them
or put more financial burden on parents. This can be seen
as an unintended consequence of reforms and an
example of the negative effect of decentralisation.
Obviously, limiting Gmina sources of income forced them
to decrease availability of non-obligatory services. Keeping
in mind that preschool education is almost unanimously
seen as a crucial problem of the education sector in
Poland, one should not hesitate to claim that effects of the
education reform were in fact not expected.
17 Notice that all expenditures have been calculated using the population of the whole country, not Gmina population as
it has been done in a previous part of the study.
18 Compare HBS based findings presented in the next subsections, especially regression analysis results.
24
3.2 Education, Efficiency and Household
- Public expenditure compared
Changes
It is clear from the analysis presented above that the
average public education expenditure (in constant prices)
increased between 1998 and 2003. However, the
decrease between 2000 and 2001 should be noticed (see
Figure 8 and Table A8 in the annex for detailed data). It is
really hard to assess a causal relation between this
decrease and different policies implemented by the
1999/2000 reform of education (e.g. new scheme for
educational subvention, new regulations of teachers’
salaries, and reorganization of school network) or
demographic changes (population decline). Clearly, if any
increase in efficiency was due to reform or
decentralisation it was not long lasting. The average cost in
constant prices of all education services provided by
Gminas was higher in 2003 than in 1998.
One may ask whether household education expenditure
increased in a similar way. In Figure 11 below household
expenditure and sub national government spending are
compared. 17 In the first row of figure 11 demographic
trends in the size of the respective population of children
is presented. This gives some idea as to how demographic
changes could influence average Gmina spending. In order
to take this into consideration the total preschool and
primary school expenditures were related to the total
number of inhabitants (per capita) and to relevant
numbers of potential users of these services: the number
of 3-6-year-olds in the case of preschool education and
the number of students in schools in the case of primary
education.
Household expenditure on preschool
education
The figure evidently shows that average spending on
preschool education increased in the studied period,
regardless of the indicator used and despite the decline in
the relevant population. What is worth emphasizing is that
preschool expenditure of households and Gminas rose
together. 18 One could state the hypothesis that this is
the effect of lowering Gmina involvement in preschool
financing. The rise of average Gmina spending on
preschool education can be attributed to the rising
teacher salaries and it does not mean that Gminas were
more involved in preschool financing and subsidizing
households. In fact, lowering the number of kindergartens
shows that Gminas tried to save on preschool
expenditures. They possibly put more financial burden on
households (remember that it is allowed to collect fees in
kindergartens). That interpretation is in accordance with
the presented results.
To further investigate the relation between Gmina and
household spending on preschool education, the Gmina
expenditure per child going to kindergarten or ‘zero’ class
were related to household expenditures per child going
to kindergarten or ‘zero’ class. This allows one to compare
how the total cost of preschool education was divided
between Gminas and users.
Impact of Decentralisation
The figure below shows that average Gmina expenditure
rose much faster than user fees. In 1998 Gminas spent
about 2.3 times more while in 2003 Gminas spent 2.6
times more than households. This number, however,
should be taken with great caution because Gmina
expenditure comes from fiscal data while household
expenditure is a proxy estimate (see explanations given in
the detailed analysis of HBS data below).
Household expenditure on primary school
education
In the case of primary school expenditure, while per
capita costs declined significantly due to demographic
trends, the average Gmina spending per student increased
and household expenditures remained stable.19 One
should note the difference between a solid and dashed
line on the lowest graph. They differ for 1999 and 2000,
the year new lower-secondary schools were introduced.
In this period the household survey classification of
schools was not clear and at the same time Gmina
expenditure could also be misclassified. However, while
Gmina primary school costs follow the path of overall
education expenditures it is hard to say whether the peak
in household costs is due to education reform and
decentralisation or is the artifact. To answer these
questions total expenditure was divided by the number of
primary school pupils only (solid line) and by the number
of primary and lower-secondary school students in 1998
Figure 11.Household and gmina expenditure on education
and 1999 (dashed line). The flat dashed line suggests that
household expenditures remain stable in the whole
period, but it is difficult to say which indicator is more 3.3 Education, Efficiency and Household
reliable. Regardless of this, one should note that spending
household spending is very low.
Household efficiency and data source
From the household perspective, efficiency is identified
Figure 12.Household and gmina preschool expenditure with an individual expenditure. A reform producing higher
private expenditure would be treated as inefficient.
per child
Therefore, in this research, efficiency effects of
decentralisation of the education sector are studied
through the comprehensive analysis of household
expenditure on education.
The analysis begins with the overview of HBS household
expenditure over the period of 1998-2003, expressed in
constant prices of 1998 (with the overall CPI deflator)20 . It
uses simple statistical indicators measuring the incidence
and the amount spent: overall averages, broken up by
place of residence (rural-urban), and by the level of living
(according to the consumption quintile 21). This gives a
background for further investigation.
The Gmina expenditure impact is examined using HBS
and BDR, combined. This part of the research is based on
the estimation results of household education
expenditure functions, with Gmina’s expenditure among
regressors.

19 More detailed analysis of the private cost of a student at primary level is given in the next subsections.
20 See Methodological Annex for comments and statistics.
21 More information on setting quintiles is given in Methodological Annex.

25 Impact of Decentralisation
Some methodological remarks may be useful at this
point. Expenditure on education recorded in household
budget surveys include goods, i.e. textbooks, copybooks
and the like, and services, such as tuition, special fees
required by public schools (for extra classes for instance),
private lessons at home, training etc.22 The latter may be
split into education levels (except overall training), while
the former cannot. It should also be noticed that HBS
expenditures on education do not cover such expenses
as transportation costs, school uniforms (if any) etc. 23 All
this limits the analysis.
3.3.1 Change of household education expenditure
in 1998-2003
Incidence ratio
Let us start with a short examination of the incidence of
education expenditure, measured with the share of
household spending on education within the total number
of households. Although, in principle, education at primary
and secondary levels is not payable, households with
children at school have to spend on textbooks,
transportation, additional training etc. Decentralisation
might have influenced not only the amount spent but also
the incidence of spending. Therefore, a closer look at the
appropriate figures may be meaningful.
On the average, the incidence of households spending on
education is rather low. It reaches only 33% (Figure 13,
below, ATE5 Annex, and Table AT1 Annex). This ratio has
been very stable over time and it is hardly differentiated
between household groups, either by rural/ urban areas
or by the consumption quintile. In 1998-1999, incidence of
education expenditure was slightly higher in rural than in
urban areas. Since 2000 this ranking has reversed. But in
general, the decentralisation of 1999 had almost no
impact on the incidence of household expenditure on
education.
Fig. 13. Incidence of household expenditure on education,
1998 - 2003
by place o
45
40
Percent
35
30
25
1998 1999 2000 2001 2002 2003
Year
Rural
Urban
22 In principle, HBS expenditure should cover money value of goods received for free. In case of education, free meals
at school, for instance, could be included. This information is not recorded in HBS but - since in kind consumption of
goods at school is not frequent - it may be reasonably assumed that it is not very important. On the other hand, Polish
HBSs cover in kind consumption of food and energy.
23 This corresponds to the SNA classification of expenditures.
26
The incidence ratio by household consumption quintile
looks interesting. Share of households spending on
education has always been the highest for the poorest
households, more specifically for the households of the
second and the fourth quintile groups, and it has always
been the lowest for households of the fifth quintile
(Annex Table AT1 and Figure ATE5). This is due to the
demographic characteristics of households. Students
concentrate in the lowest quintiles, therefore the poor
households spent more frequently than the rich
households. This pattern has not varied over time, and
only very small changes occurred after 1999 (a marginal
decline of the incidence of spending for the poorest
households).
Overall expenditure
On the average, household expenditure on education is
very low, both in absolute and in relative terms (Figure 14
and Annex Tables AT2 and AT3). In 1998, households
spent less than PLN 10, per capita per month, i.e. less than
2% of the total expenditure. Since 1999 (the year of the
reform), this expenditure slightly increased: up to PLN
11-12, or 2.3% of the total. At this moment, it is hard to
say whether decentralisation has had any impact regarding
this small change.
All over the period, education expenditure of urban
households was (on the average) higher than expenditure
of rural households, both in absolute terms and relative to
the total household expenditure (Figure 14, Annex Tables
AT2 and AT3). This difference amounted to PLN 6-7 per
month (urban: PLN 12-14, or 2.0%-2.5% of the total
expenditure, rural: PLN 6-8, or less than 2% in relative
terms) and it was somehow bigger in 2002-2003 than
before.
Fig. 14. Mean household expenditure on education, 1998
- 2003 by place of residence
15.0
PLN98, per capita per month
12.5
10.0
7.5
5.0
Rural households
1998 1999 2000 2001 2002
Urban households 2003
Year
Some small changes over time may also be seen if
household quintile groups are compared (Annex Figure
ATE6). First, notice that households of the fifth quintile
spent much more in per capita terms than all others. This
refers to urban as well as to rural households.
Impact of Decentralisation
In 1998, for instance the average per capita expenditure in
the first quintile group was equal to PLN 3 (rural) or PLN
4 (urban), while in the fifth quintile it was equal to PLN 16
(rural) and PLN 22 (urban). Over time, the education
expenditure of all quintile groups, except the fifth, has
remained almost unchanged in real terms. In the fifth
quintile group this expenditure clearly increased. This
increase, however, cannot be associated with the
decentralisation reform of 1999. Growth in 1998 – 2003
was rather stable, with no evident ‘jumps’ or breaking
points.
Yet another statistical investigation confirms this
conclusion, namely the analysis of the household
education expenditures by type (Figure 15 below, and
Annex Table ATE3).
It is evident that the increase of household education
expenditure was mostly due to the increase of spending
on higher education. While expenditure on primary and
It has been done in the following way. Households with
children at the preschool age 3-6 and with positive
expenditure on preschool education have been selected.
For this sub-sample, the monthly average per child (age
3-6) was computed. The cost of enrollment at primary
school was computed on the basis of all households with
children enrolled, disregarding the level of their
expenditure (zero was not rejected). This approach
reflects the fact that, in general, primary education is not
payable and in many cases zero expenditure may occur.
Results regarding preschool education are displayed in the
Annex Table AT4, and in four graphs, two of them are
enclosed below (16 and 17), two others in the Annex
(ATE7 and ATE8).
Fig. 16. Household preschool expenditure per child at
kindergarten, 1998 - 2003, by place of reside
150.0

PLN98 per child per month

secondary levels fluctuated or even decreased (2003
compared with 1998), it was not the case for higher 122.5
education. In real terms, this expenditure increased each
year, both in rural and in urban households. But it still has
not been very high. 95.0
Fig. 15. Household expenditure on educational services
by education level, 1998 - 2003 67.5

5.00 40.0
1998 1999 2000 2001 2002 2003
PLN98, per capita per month

Year
3.75 RURAL
URBAN

2.50
150.000
PLN98 per child per month

131.667
1.25
113.333

0 95.000

1998 1999 2000 2001 2002 2003 76.667

Year
58.333
Preschool and primary level Secondary level
Higher level Additional training
40.000
All this allows the conclusion that the reform of 1999 had 1998 1999 2000 2001 2002 2003
a marginal impact on household expenditure on Year
education. A moderate increase of the average private
spending regarded higher education, and it was visible for
more affluent, urban households. Quintile 1
Quintile 2
Cost per student Quintile 3
Another question worth studying with respect to the Quintile 4
Quintile 5
efficiency concerns spending per student in various
groups of households. Actual cost per one enrolled child Fig. 17 Householdpreschool expenditure per child at
or per one student is crucial when addressing efficiency kindergarten, 1998 - 2003, by hh quintile
issues. Given the Gmina decentralisation perspective
provided by this research, the cost at the preschool and at According to the HBS data, a child in kindergarten
the primary level is the most important. required about PLN 90 of private payment per month in
HBS data allow for the measurement of the cost per one 1998. This amount increased over time, reaching PLN 108
child enrolled in kindergarten using a proxy, since there is in 2003 (in constant prices). The increase was rather
no direct information on the actual enrollment in the steady, showing no visible impact of the decentralisation
questionnaire. reform of 1999. This is not surprising, for the reform itself
has not directly effected preschool education.

27 Impact of Decentralisation
Private expenditure per one enrolled child has always
been much higher in urban than in rural areas. This
discrepancy became more pronounced over time. In 1998
it was equal to PLN 40, in 2003 it was close to PLN 60
(in constant prices). Once again, there are almost no signs
of the 1999 reform. The only irregularity concerns 2000
when the private cost of a child in kindergarten slightly
declined in rural areas.
Looking at changes of the private preschool cost by
household quintiles, it is difficult to detect any impact of
the year of the reform (the higher the quintile group the
higher cost involved). At same time, however the gap
between quintiles increased. This is due to the increase of
the spending of rich households, while the poorest spent
the same amount all the time.
Compared to the cost of a child at a kindergarten, the
private cost of a student at primary school is very low
(see Annex Table AT5 and Figures ATE9 and ATE10).
Certainly, this has been expected, since in general public
education at this level is not payable. On average,
households spent about PLN 6 per month per one
student enrolled in 1998, and this amount declined over
the period under investigation, except for the year 2000.24
But this decline was very moderate.
Finally, it should be noticed that the situation of the richest
households has been exceptional, especially in urban
areas. For urban households of the fifth quintile, the
average cost for a primary student amounted to PLN 20
in 1998, while at the same time it was equal to PLN 2 for
households in the lowest quintile group (Annex Table
AT5). For the richest, cost increased quickly, especially
after 2000. It is hard to say what exactly pushed this cost
up. Quite possibly, the relative number of students at
private primary schools in the richest households
increased at that time but HBS does not provide
necessary information to confirm this hypothesis.
One may conclude that – as in the case of the overall
education expenditure – it is hard to detect any visible
impact of the 1999 decentralisation reform on the
household cost of educating a child at kindergarten or a
student at elementary school.
3.3.2 Regression analysis of household expenditure
on education: 1998, 2003 and 1998+2003
Regression analysis may be very useful for the
investigation of the impact of education reform on
household expenditure. As it has already been mentioned
(see the subsection with probit regression results), this
type of analysis allows one to single out the impact of
selected regressors, such as Gmina expenditure, on a
dependent variable, while other determinants of this
variable may be controlled. Estimation repeated for years
before and after the reform (here: 1998, 2003 and 1998
+2003 with a special set of regressors) gives ground for
testing decentralisation effects.
24 This finding, i.e. the increase of expenditure in 2000, should be further analyzed for it is rather unexpected. It looks
that it resulted from the cost increase for the richest households, exclusively.
25 Both variables may be represented by more levels, four and six, respectively. But only two levels have been found
appropriate, given statistical properties of estimated functions.
26 Notice, however, that in case of the regression on the pooled data sets, implicit assumption (statistical restriction) is
made that the influence of household variables on hh education expenditure remains unchanged.
28
Therefore, regression analysis seems especially important
for the main purpose of this research.
All regressions discussed in this subsection have been run
on HBS’s supplemented with BDR variables. HBS’s have
been restricted to sub-samples covering households with
house hold members at age 03 – 24, which is at
‘education age’. It may be reasonably assumed that if
persons at this age are not present, there is no reason
that a household should spend on education. Certainly, it
may happen that it actually does, but such cases are not
numerous nor important for this research.
The dependent variable has been defined in a special
way. It does not cover all educational expenditures
recorded in HBS. Some items - such as expenditures on
university education and on various courses not related
to primary or secondary levels - have been excluded
because they cannot reflect any impact of Gmina’s
policies.
Regressors have been selected according to both the
general knowledge of household behavior and to the
main purpose of this research. It has been assumed that
the amount spent by a household depends on its
economic, social and demographic characteristics
(standard of living measured with a total house hold
expenditure, education of a house hold head, share of
house hold members at ‘educational age’ and area of
residence), and it also depends on Gmina’s expenditure
on education. Since the latter may have a different impact
on poor and on non-poor households, a separate variable
(a product of household poverty indicator and Gmina’s
expenditure) has been created in order to test this
assumption. Education of a household head and area of
residence have been introduced as dummies, with three
levels each.25 A set of regressors for a pooled regression
has been supplemented with variables in order to
distinguish the influence of Gminas’ spending on
household expenditure from one year to another.26
Notice also in the latter case, all expenditure variables
have been expressed in 1998 constant prices.
A double-logarithmic function has been selected for the
analysis mostly because it allows for interpreting main
coefficients in terms of elasticity. It has a certain
disadvantage, namely it restricts sub-samples used for
households with positive education expenditures. On the
other hand, elasticities are easier to compare than, say,
coefficient showing marginal effects, which is crucial for
this research.
Regression coefficients have been estimated by WLS,
using HBS household weights. Such an approach may be
questioned for regressions estimated on sub-samples or
on a pooled two-year sample. However, weighting (even
with some deficiencies) seems a better option than
neglecting weights completely.
Impact of Decentralisation
Hypotheses tested with the use of the regression
functions may be stated as follows:. Gmina’s expenditure on Notice also that for 1998, estimators of parameters are all
education has a certain impact on the household statistically significant and all carry the proper sign. In
expenditure and it may differ for the poor and the non-poor 2003, however, the coefficient associated with a share
populations. 3-24 variable in not significant (see column 2003 (1)) and
It seems that this impact is negative; that is the higher the may be excluded with almost no effect on other
Gmina expenditure the lower is household education regression statistics (compare column 2003 (1) and (2)).
expenditure. This may be seen through the analysis of In case of regressions run for 1998 and 2003 separately,
coefficients based on cross-section estimations. signs and comparative levels of Gmina’s coefficients for
Decentralisation of 1999 might have changed the strength each year are the most important. As already mentioned,
of the Gmina’s impact. However, as the results of one may expect that they are negative. A significant
preliminary statistical investigation show, major changes difference in the level of estimated coefficients between
have possibly not taken place. This may be seen through two years may be – cautiously - interpreted as an
the analysis of coefficients estimated using pooled data. indicator of the change of Gmina’s impact on household
Main estimation results are presented in Tables 4 and 5, spending due to the changes of Gmina fiscal policies over
for separate years and for the pooled data set, time.
respectively. Detailed statistics as well as other estimation Estimation results show that in both years elasticities
versions may be found in the Annex (Tables ATE1eff – regarding Gmina fiscal variables are in fact negative. This
ATE8eff). means, in short, that the higher the Gmina’s expenditure
the lowest is household educational expenditure (keeping
Table 4. Double-logarithmic regressions of household all other variables constant). This effect looks even
expenditure on education, 1998 and 2003 stronger for the poorest population (negative sign of the
poor*Gmina expenditure coefficient).
D e p e n d e n t 1998 2003 1998 2003
variable: hh edu For the purpose of this study, the most important is a
exp (selected (1) comparison of 1998 and 2003 estimates of Gmina’s
(1) (2) (2)
items), pc expenditure coefficients (elasticities). Both of them are
urban 500+ 0.31 0.32 0.31 0.32 slightly higher in absolute terms in 1998 than in 2003
urban 200-500 0.12 0.18 0.12 0.19 indicating that the impact of Gmina’s fiscal policies was
Education: somewhat stronger before than after decentralisation. This
higher 0.31 0.37 0.3 0.37 finding should be confirmed by more precise statistical
Education: tests. At this moment it cannot be tested whether the
secondary 0.2 0.12 0.2 0.12 differences between elasticities are statistically significant.
share of hh
members age In order to confirm that, household expenditure function
3-24 0.5 0.12xx with year-indicator variables estimated on a pooled data
hh exp pc 0.83 0.83 0.81 0.83 set is useful. In the regression function run on the pooled
Gmina exp edu 1998+2003 HBSs, an indicator for the year of 2003 (=1
pc -0.3 -0.3x -0.3 -0.3x in 2003, 0 in 1998) has been used to add three new
poor* Gmina variables. Variable year03 alone may be used for testing
edu pc -0.1 -0 -0.1 -0 the difference in the level of household education
_cons -2.2 -2.1 -1.9 -2.1 expenditure. If year03 is multiplied by the Gmina’s
Number of obs = 11000 9753 11000 9753 expenditure variable, it may be used for testing the
R-squared = 0.16 0.15 0.16 0.15 difference of the impact of Gmina’s policies on household
Adj R-squared = 0.16 0.15 0.16 0.15 expenditure between the years before and after
Note: decentralisation, i.e. between 1998 and 2003 (slope of
All non-tagged coefficients are significant at less than 1% level. year03*Gmina edu). The latter variable multiplied by
Coefficients marked with xx are not significant (P for z variable > household poverty indicator (poor) may be used for
10%). Coefficients marked with x are significant at 5%. Exp
stands for expenditure, hh for household, pc stands for per
testing the significance of the change of the impact of
capita. Highlighted are coefficients/variables of special interest. Gmina’s policies for poor households.
HBS sample is restricted to households with hh members 3-24.
See Annex tables for detail.

Source: HBS + BDR, own computation.

First, notice that the goodness of fit (R2) of estimated

regressions is very low. This indicates certain problems in
building education expenditure functions given the data
available. Estimation is based on individual household
data. Households differ considerably in their behavior and
it is difficult to explain this variety of behavior with a
limited set of explanatory variables.

29 Impact of Decentralisation
 3.3.3 Regression analysis of household expenditure
on kindergarten: 1998, 2003 and 1998+2003
Table 5.
Double-logarithmic regressions of household Regression analysis of household expenditure on
expenditure on education, 1998+2003 kindergarten has been used in a similar way as the analysis
regarding overall education expenditure. As already
Dependent variable: mentioned, the main advantage of this tool is the
hh edu possibility to assess the impact of Gmina spending on
(1) (2) (3) (4) household expenditure, controlling for other determinants
exp (selected items),
pc of household behavior. Regressions repeated for the pre
urban 500+ 0.315 0.313 0.319 0.314 and post reform year allow for comparisons of results.
urban 200-500 0.149 0.148 0.164 0.148 Moreover, mixing pre and post reform data for estimation
Education: high 0.339 0.339 0.333 0.339 opens a way for finding the influence of the period
considered.
Education: secondary 0.160 0.160 0.155 0.160
hh exp pc 0.817 0.817 0.816 0.817 For the purpose of the regression analysis of household
Gmina exp edu pc -0.34 -0.272 -0.39 -0.283 expenditure on kindergarten, a dependent variable has
been defined in terms of the actual household
poor* Gmina edu pc -0.06 -0.053 -0.05 -0.053
year03*Gmina edu expenditure per child, or in other words, in terms of a
pc 0.099xx -0.021 private cost of a child at kindergarten. Notice that such
year03*poor*Gmina an approach makes it supplementary to the probit
edu pc 0.016xx -0.01xx analysis, already discussed: first, a household decides
year03 -0.45xx -0.079 whether to send a child to kindergarten (probit), then
_cons -1.82 -2.058 -1.67 -2.019 how much to pay for it (regression). 27
This reasoning suggests that explanatory variables of the
Number of obs = 20753 20753 20753 20753 expenditure function should in part reproduce the set of
R-squared = 0.155 0.155 0.154 0.155
regressors used in the probit analysis (place of residence,
number of children at ‘preschool’ age, number of non
Adj R-squared = 0.154 0.154 0.154 0.154
Note: working hh members, education of the household head
and total household expenditure). Gmina expenditure on
All non-tagged coefficients are significant at less than 1%
level. Coefficients marked with xx are not significant (P for z kindergarten (per child) in 73 TUs and a mix of this
variable > 10%). Coefficients marked with x are significant at variable with the household poverty indicator has been
5%. Exp stands for expenditure, hh for household, pc introduced as well. For the estimation on pooled data
stands for per capita. Highlighted are coefficient/variables of sets, a year indicator taking one in 2003 (year03) has been
special interest. HBS sample is restricted to households with
hh members 3-24. See Annex tables for detail. used, and was mixed with Gmina variables.
Source: Estimations were run on a sub-sample of households
HBS + BDR, own computation. which children at the ‘preschool’ age 3-6, and household
weights have been used. As for the function itself, double-
The results displayed in Table 16 column (1) show that logarithmic form has been selected for reasons already
none of these variables are statistically significant, if all discussed in the previous subsections. Notice also that in
three of them are present in the regression. But it may cross-sectional analysis all expenditure variables were in
happen that the difference between 1998 and 2003 is current prices, but they have been deflated with CPI98
significant either for the level (variable year03) or for the when a pooled data set was used.
slopes (variable year03*Gmina exp edu or variable
poor*year03*Gmina exp). In fact, this is the case as Estimation results which have been accepted are
shown by the estimation results displayed in Table 16 presented in Table 6 below, detailed statistics and other
column (2), (3) and (4). Negative and statistically versions may be found in the Annex (Tables ATE1pre –
significant coefficient of variable year03*Gmina exp equal ATE6pre).
to -.021 (Table 16 column (2)) may be interpreted in
terms of stronger impact of public expenditure in 2003
than in 1998.
Main results of this section may be summarized as
follows. The impact of Gmina education expenditure on
household expenditure is negative meaning that the
higher the Gmina the lower the household expenditure.
This impact is more pronounced for the poor than the
non-poor households. The effect of the 1999
decentralisation reform on household education
expenditure is rather weak. There is no effect on the poor
population whatsoever, and the overall effect of Gmina
spending is negative, lowering slightly household education
expenditure.

27 In fact, both functions might have been estimated jointly, and Heckman procedure might be helpful in this case.

30 Impact of Decentralisation
 Gminas spending more are richer and they have higher
price levels in general.
Table 6.
Double-logarithmic regressions of household Regressions run on the pooled data set allows for the
expenditure on a child at kindergarten: 1998, 2003 estimation of a parameter of the year variable (year03
and 1998+2003 indicator in Table 6 and in Annex Tables ATE5pre and
ATE6pre). Coefficient of a variable showing a combination
Dep var: hh 1998 2003 1998 2003 1998+2003 of the year indicator and Gmina expenditure, (i.e.
exp per child year03*Gmina expenditure) is especially interesting. This
a t (1) (1) (2) (2) (1) coefficient is positive and may be added to the coefficient
kindergarten of Gmina expenditure alone. This shows that elasticity of
urban 0.34 0.27 0.34 0.3 0.32 household expenditure on kindergarten with respect to
nof members the Gmina expenditure was higher in 2003 than in 1998.
age 3 -6 -0.4 -0.32 -0.4 -0 -0.4 But, as it might have been expected, this change is rather
nof non small.
w o r k i n g
members -0.1 -0.11 -0.1 -0 -0.11
Education: x
high 0.08 x 0.08 x 0.08 x
hh exp pc 0.21 0.31 0.25 0.3 0.28
Gmina exp
edu pch 0.14 0.27 0.14 0.3 0.19
poor*gm exp
edu pch -0.02xx
year03*gm
exp edu pch 0.01 x
_cons 2.71 1.56 2.46 1.4 2.04

Number of obs = 982 915 982 915 1897

R-squared = 0.326 0.332 0.32 0.3 0.333
Adj R-squared = 0.321 0.327 0.32 0.3 0.330
Note:
All non-tagged coefficients are significant at less than 1% level.
Coefficients marked with xx are not significant (P for z variable >
10%). Coefficients marked with x are significant at 10% (1998)
or 5% (1998+2003). HH stands for household, exp for
expenditure; pc for per capita, and pch stands for per child.
HBS sample is restricted to households with children 3-6, and
positive exp on kindergarten. See Annex tables for detail.
Source:
HBS + BDR, own computation.
Cross section versions of the expenditure per child in
kindergarten have only five explanatory variables which
are statistically significant, but the goodness of fit looks
satisfactory (see Table 6 column (3) and (4)). One of the
variables which were useful in the probit regression,
namely education level of the household head, proved
insignificant in both years (see Table 6 column (1) and (2))
and it was dropped. The attempt was made to keep both
Gmina expenditure variables in the function but the mix
of Gmina expenditure with the poverty indicator has
never been significant. This is in fact meaningful showing
that all households, poor and non-poor in a given area
have to pay a similar amount per child at kindergarten.
The most interesting for the purpose of this research is
the coefficient of the Gmina’s expenditure variable. It is
positive and significant both in 1998 and in 2003
indicating – rather unexpectedly - that the higher the
Gmina expenditure the higher also are payments made by
a household. This may be interpreted in the following way.
Higher local expenditure means a better equipment of
Gmina with kindergarten. In fact, preschool enrollment in
such a case is higher as shown by the probit analysis
(notice positive effect of Gmina expenditure on preschool
enrollment). Nevertheless, higher public expenditure
induces higher private payments because, quite possibly,

31 Impact of Decentralisation
3.4 Summary The interesting part from this regression analysis is the
coefficient of the Gmina’s expenditure variable. It is
Impact by Proxy positive and significant both in 1998 and in 2003
Impact of Decentralisation on Educational Efficiency is indicating – rather unexpectedly - that the higher the
measured through expenditure proxies. In general, Gmina expenditure the higher also are payments made by
increased expenditure due to decentralisation implies a a household. This may be interpreted in the following way.
lower efficiency effect, this goes for the public and private Higher local expenditure means a better equipment of
perspective. Gmina with kindergartens. In fact, preschool enrollment in
such a case is higher as shown by the probit analysis
Public Spending (notice positive effect of Gmina expenditure on preschool
Gminas educational expenditure per student has enrollment).
increased, however this increase has not been a stable
one. Disruptions in the year-by-year expenditure growth
can be explained by other mitigating factors than the
decentralisation process. While the differentiation of per
student expenditure among Gminas grew smaller after
2000, the opposite occurred for preschool expenditures.
Mixed picture
Although lower variation among Gminas’ expenditures is a
positive sign of greater equity, the expected effects of
decentralisation would predict a greater deviation. An
explanation for the increase of variation in relation to
preschool expenditure could possibly be the tightening
effects that the new algorithm had on Gminas budgets
and respectively on their non-obligatory tasks.
Household v. Public Spending
Compared to public spending, there were few changes in
household spending on primary education. However, once
again, this was different for preschool education.
Expenditure rose, most probably due to increased fees
that were imposed by Gminas to redirect costs.
Change in household expenditure
In general, the decentralisation of 1999 had almost no
impact on the incidence of household expenditure on
education. The reform had a marginal impact on the
overall household expenditure on education, but this is
difficult to say. A moderate increase of the average private
spending is in relation to higher education, and it was
visible for more affluent, urban households. The increase
of household preschool expenditure per student has
raised steadily, showing no visible impact of the
decentralisation reform of 1999. This is not surprising, for
the reform itself has not directly effected preschool
education
Regression analysis household school
expenditure
The functionality of regression analysis is that it allows to
single out the impact of selected regressors, such as
Gmina expenditure, on a dependent variable, while other
determinants of this variable may be controlled.
Regression analysis showed that the impact of Gmina
education expenditure on household expenditure is
negative meaning that the higher the Gmina the lower the
household expenditure. This impact is more pronounced
for the poor than the non-poor households. The effect of
the 1999 decentralisation reform on household education
expenditure is rather weak. There is no effect on the poor
population whatsoever, and the overall effect of Gmina
spending is negative, lowering slightly household education
expenditure.
Regression analysis household preschool
expenditure

32 Impact of Decentralisation
33 Impact of Decentralisation

4. Equity
This chapter
In the previous chapters, distribution of Gmina average
education expenditure was examined. It showed that the
average level of education expenditure increased between
1998 and 2003. At the same time, variations among
Gmina preschool spending also increased while variation
in primary expenditure decreased or remained
unchanged. This does not mean that the distributional
effect or equity among Gmina in the level of funding has
remained the same. To assess this one should check
whether a change in educational spending in this period
was correlated with Gmina revenue or household
income. This is the main purpose of the analysis presented
below.
Contents
4.1 Education, Equity and Public Spending
4.2 Education, Equity and Household Spending
4.3 Summary
4.1 Education, Equity and Public
Spending
Correlation of revenue and education
expenditure
Typical analysis of decentralisation distributional effects
tries to relate sub national government expenditure to
revenue. Figure 18 below presents this relationship in the
case of overall education spending per student in
1998-200328.
Figure 18.Relation between Gmina revenue and education
expenditure
On the horizontal axis, total Gmina revenue minus the
amount of general subvention is displayed (per capita).
The subvention is taken off because it contains education
subvention as well as an equalization part, and thus should
not be used to assess the sub national government’s
28To make this figure, as well as figures 19 and 20, clearer small number of Gmina with exceptional revenue
(more than 2000 PLN) or extraordinary spending (more than 6000 PLN) were excluded. These observations
were also excluded from regression analysis. That was about 1-2% of the sample depending on the year.
34
wealth. On the vertical axis Gmina total spending on
education per student/child is set.
The figure confirms a positive relation between Gmina
revenue and education spending; Gminas with higher
average revenue spend more. However, a significant
amount of variation remains unexplained. Thus, more
comprehensive analysis is needed to assess this relation.
This may be done using regression analysis. But before its
implementation, it is worth looking separately at the
relation between revenues and school as well as
preschool expenditures. Data already discussed show
important differences between preschool and school
financing and organization. One can expect that these
differences translate into the distributional effects of
decentralisation.
Per school variation
It may be seen from Figures 19 and 20 that in fact this is
true. School expenditure is not related to Gmina wealth,
except in the period 1999-2000 where signs of negative
relation could be observed. That should not be
interpreted before we proceed with regression analysis. In
the case of preschool expenditure, positive relation is
easily visible validating the need for separate analysis. The
source of this difference is obvious when one bear in
mind that preschool education is funded completely from
Gmina’s own revenues.
Figure 19.Relation between Gmina revenue and primary
school expenditure
Figure 20. Relation between gmina revenue and preschool
expenditure
Impact of Decentralisation
Regression analysis Gmina Revenue and
School Spending
Regression analysis can be used to test hypothesis in that
the relation between Gmina revenue and spending
changed over time. In short, data from two different years
can be pooled to find whether the coefficient for the
variable of interest changed over years. In the annex
regression results from the datasets pooled over 1998
and 2003 are presented. Two different dependent
variables were analyzed: Gmina school expenditure per
student (table A11), and Gmina preschool expenditure
per child (table A12). In the basic model presented in
columns (1)-(3) three regressors were employed: dummy
for 2003, Gmina revenue minus general subvention per
citizen, and the interaction term of these two variables.
Column (1) gives estimates for the whole population of
Gmina, while in column (2) and (3) results for rural and
urban Gmina respectively are separately presented 29 .
Note, that although overall expenditure increased
(positive 2003 dummy), the relation between revenue and
school expenditure remained almost the same. The
interaction term was not statistically significant in any
regression. Thus, there was no change in the relation
between 1998 and 2003. Nevertheless, the relation is
positive proving some inequality between Gmina due to
own revenue differences.
Additional results are presented in columns (3)-(6) where
class size in primary school (alone and as an interaction
term with 2003 dummy) was added30 . Note that by
adding class size the relation between revenue and
expenditure became stronger. Class size can be a proxy of
objective school cost with limited interpretation because
it could also be affected by preferences. Nevertheless, one
can see that class size may be used to predict
expenditures, and adding class size to the set of regressors
changes the relation between revenue and expenditure.
This relation is also stronger for rural Gminas.
Additionally, the interaction term for class size and the
2003 dummy is positive in the case of rural Gmina which
suggests that changes introduced during the period
weakened the overall negative relationship. This may result
from the change in the way educational subvention was
calculated but can also be from the school network
reorganization and population decline. Regardless of this, it
can be seen that there was no change in the relation
between Gmina school expenditure and revenue
between 1998 and 2003.
Regression analysis Gmina Revenue and
Preschool Spending
The results of the regression analysis of preschool
expenditure suggest a similar magnitude of relation
between Gmina revenue and spending in 1998. However,
the interaction term of the 2003 dummy and revenue is
positive and statistically significant for the whole
population and for urban Gminas. This suggests that in the
examined period the relation between preschool
expenditures and revenue became stronger for urban
Gminas.
29 The category of urban Gmina here comprises mixed “rural/urban” Gmina to increase number of
observations.
30 It was not possible to add gimnazjum class sizes because they were not established yet in 1998, but from
other research it is known that gimnazjum class sizes do not considerably explain expenditure (this results
are from unpublished studies and can be obtained from authors on request).
35
Columns (4)-(6) display additional results where, again,
class size was used as one of the regressors. This time
class size should be interpreted in a different way. It can
be treated as a proxy for objective costs of primary
education and thus measures how much Gmina is forced
to spend on schools. Adding class size to the analysis
slightly lowers Gmina revenue coefficients but this effect is
rather modest. More interestingly, class size coefficients
are positive and statistically significant in all regressions.
This convinces one to formulate a hypothesis that Gmina
school expenditure affects preschool expenditure and
that a Gmina with small classes (and in one of the
interpretations with high objective costs) is not able to
support preschool education at the level similar to Gmina
with similar revenue but bigger classes. Surely, more
detailed investigation is needed at this point but these first
insights seem important. They show that support for
preschool education is not independent from school
costs.
Poverty and preschool expenditure
As mentioned earlier, the problem of insufficient
availability of kindergartens seems crucial for enhancing
educational opportunities of children from poor and
disadvantaged households. The vital question here is
whether household income or poverty is related to the
level of preschool participation and whether this relation
changes with decentralisation. It is not possible to answer
this question using solely sub national government data
because these data do not include household
characteristics. For this purpose, fiscal and household data
should be analyzed jointly. Therefore, BDR and HBS have
been merged through 73 territorial units. Using HBS,
several variables were computed for every TU: household
per capita income, poverty rate, share of population with
secondary or higher education, and household
expenditure on different educational services. Figure 21
below displays the poverty rate calculated for every
territorial unit related to the preschool participation level
among 3-6-year-olds.
Figure 21. Poverty rate and preschool education
Impact of Decentralisation
Figure 21 clearly shows that poverty level is a very good
predictor of the preschool participation rate. The strength
and sign of this relation gives cause for concern. Clearly,
poorer territorial units have smaller numbers of children
in preschool education which lowers their educational
opportunities. This in turn may deepen regional
differences between household well-being in a longer
period. In 1998 – 2003, however, there is no change in this
relation. Thus, it seems that there is no sign of a positive or
negative effect of decentralisation on preschool service
accessibility for households with different standards of
living.
4.2 Education, Equity and Household
Spending
The question regarding the effects of decentralisation in
public service sectors on household inequality seems
crucial. One would expect that decentralisation allows for
better allocation of public funds at the local level,
therefore it would reduce household income inequality. In
fact, this effect may not occur. It may happen that rich
households benefit more than the poor and inequality
increases because the rich concentrate in more affluent
administrative units which can freely raise their
expenditure after decentralisation. This question, however,
has not been studied using empirical data.
Imputed income and primary school
expenditures
Impact assessment of decentralisation in the education
sector on household income inequality may be done
through the analysis of imputed income.31 Given the data
available at the Gmina level, this approach may be
reasonably applied only for primary education.
Imputation has been conducted on the basis of HBS and
BDR data. For each household, the number of students of
a primary school recorded in HBS was multiplied by the
Gmina’s expenditure per student, evaluated as an average
for 73 territorial units (BDR). In such a way imputed
transfer (or subsidy) was computed for 1998 and 2003.
The analysis of quintile distributions as well as
concentration coefficients may show what has changed
after the implementation of the ‘99 reform.
This has been supplemented by two benchmark
simulations of the imputed education subsidy in both
years. The first one assumed equal spending on primary
education throughout the whole country, while the
second, assumed equal spending of all rural and all urban
Gminas, respectively. The argument for such simulations
relies on the assumption that centralization may be
associated with more equal distribution of funds in the
whole country (although it is not necessarily the case).
Therefore, it might be interesting to see, how far the
actual distribution from such a benchmark is. Additional
simulation was also run for 2003. It consisted in using the
’98 distribution of Gmina’s expenditure on primary
schools for imputing household income in 2003.
31 Notice that the inequality impact of public spending through the imputed income analysis has already been
studied several times in Poland. See, for instance, Styczeń, Topińska (1999), Topińska (1991) and World
Bank (2003), pp. 97 and 104-105. However, none of these studies used sub-national data for the evaluation
of the imputed income, nor did they cover a longer period of time.
36
This has been done in order to see what would happen if
the reform would be postponed and 1998 Gmina’s
spending is kept unchanged.
Results of the imputations are presented in the form of
quintile distributions (Table ATEQ1-ATEQ2 in the
Annex), and selected results are also displayed on the
graphs (Figures 22-25, below).
Fig. 22. Imputed public transfer of TU73 on primary
education: quintile shares
40.0
32.5
Quntile share, %
25.0
17.5
10.0
1 2 3 4 5
Quntile group number
1998
2003
As Figure 22 shows, primary education subsidy goes
mainly to the poorest households, they receive almost
30% of the total transfer, while the richest over 10%. This
pattern has not changed between 1998 and 2003. In
2003, primary education transfer looks more equally
distributed, although the change is small. In 1998, the
poorest 20% of the population received 28.3% of the
transfer, while in 2003 this share amounted to 29.5%. In
the same time, the share of a transfer going to the richest
20% diminished from 13.6% down to 12.1%. This slight
change visible through the analysis of the quintile shares
may be confirmed with the use of the concentration
coefficients. They are displayed in Table 7 below.
All concentration coefficients computed for 1998 and for
2003 have a negative sign indicating that Gmina subsidy
on primary education diminishes inequality among
households, both in relative and in absolute terms.
Coefficients for two years under investigation are close to
each other. This shows that there were not major changes
between 1998 and 2003 regarding the impact of public
spending on income (or total expenditure) inequality.
Concentration coefficient of the imputed transfer for the
actual level of Gmina spending was equal to -0.076 in
1998 but it was somehow higher in 2003, i.e. -0.079. This
means that a small positive change regarding equity has
occurred. It is quite possible that this has been the effect
of the 1999 decentralisation. This change, however, was
actually very small, indicating that the pattern of
distribution of primary education subsidy was rather
stable.
Impact of Decentralisation

Table 7. Concentration coefficient of imputed primary
education transfer
Distribution of Gmina's exp on
primary education 1998 2003
Actual level of spending (different for
TU73) -0.076 -0.079
Unique level of public spending for the
whole country -0.072 -0.076
Two levels of spending: avg for rural and
avg for urban -0.078 -0.080
1998 distribution imputed for 2003 x -0.080
Memo: Gini coefficient for hh total
expenditure pc
Note:
Concentration coefficients are computed with respect to the total
household expenditure (without education transfer). Exp stands
for expenditure, avg for average, hh stands for households
Source: HBS + BDR, own computation.
Comparing these results with the simulated public
expenditure distributions selected as benchmarks one can
see that equal spending throughout the whole country
(i.e. equal for all 73 TUs) would be less favorable for the
poor households. This may be read from the
concentration coefficients, lower in absolute terms for the
benchmark case. On the other hand, two-level distribution
of the public spending on primary education, higher in
rural than in urban areas, would be more favorable for the
poor. Such a distribution of funds would equalize
household income (total expenditure) more than any
other distribution discussed.
Findings presented above should be treated with caution.
Concentration coefficients are in fact very similar for all of
the versions of public spending considered. According to
Annex Tables ATEQ1, almost no difference is seen in
quintile shares, no matter which version of public spending
is analyzed. Certainly, this shows limits of the analysis
relying on 73 TUs averages.
One more indicator of the impact of Gmina’s expenditure
on equity is worth noticing, namely the ratio of imputed
subsidy to the actual household expenditure. This ratio is
displayed using graphs (Figure 23-25, below) and tables
(Table ATEQ2).
Fig. 23. Relative imputed transfer of TU73 on primary
edcation: all households
Relative to the total hh expenditure, %
30.0
22.5
15.0
7.5
0
1 2
Quntile group number
1998
2003
37
Relative to the total hh expenditure, %
30.0
22.5
15.0
7.5
0
1 2 3 4 5
Quntile group number
Relative to the total hh expenditure, %
30.0
22.5
0.335 0.360
15.0
7.5
0
1 2 3 4 5
Quntile group number
1998
2003
Fig. 24. Relative iImputed transfer of TU73 on primary
education: rural households
Fig. 25. Relative imputed transfer of TU73 on primary
education: urban households
On the average, households received as much as 6% of
their expenditure in the form of imputed primary
education transfers in 1998. In 2003, this ratio diminished
down to 5%. This decrease affected all quintile groups, in
rural and in urban areas. However, it seems that that it
was more pronounced in rural areas. On the average,
Gmina transfers relative to the household expenditure
declined from 9.8% to 7.9% in rural, while from 4.4%
down to 3.7% in urban areas. This may carefully be
interpreted as one of the negative effects of the ’99
reform.
In general, the poor benefit more than the rich from the
public fund on primary education. This is a result of a
demographic composition of households: the share of
primary school students is usually higher in the poor
rather than in the rich households. Both in 1998 and in
2003, households of the first quintile group received
implicitly more than 20% of additional income, while the
most affluent households of the fifth quintile less than 5%
(Annex Tables ATEQ2). These coefficients slightly
diminished over the period 1998-2003, affecting all groups
of the population.
Changes were similar in rural and in urban areas. In 1998,
the rural poor received 24% of their initial expenditure in
the form of public transfers. In 2003, this ratio was equal
to 23%. In urban areas, primary education subsidy was
equal to 17.5% of the household expenditure in the first
quintile, and it went down by 0.5 pp.
The main findings of the imputed income analysis may be
summarized as follows. Gmina’s expenditure on primary
education has a visible equalizing impact on household
income (total expenditure). This may be seen through the
3 4 5
concentration coefficients, quintile shares of public
spending as well as through the ratio of imputed subsidy
to the actual household expenditure. The decentralisation
of 1999 had a very small effect on household inequality.
Impact of Decentralisation
It seems that this effect has been rather positive, meaning
that the equalizing effect of public spending slightly
increased. One of the reasons of this effect is a quite
stable pattern of spending on primary education.
The analysis has also shown some methodological
deficiencies connected with the (enforced) use of the
average Gmina spending for 73 territorial units. Certainly,
there is a need for the use of special surveys in order to
study the distributional impact of education expenditure.

4.3 Summary

Revenue and public education expenditure

The analysis of decentralisation distributional effects tried
to correlate sub national government expenditure to
revenues. It confirmed a positive relation between Gmina
revenues and overall education spending, although a
significant amount of variation remains unexplained. There
is a variation when looking separately at school and
preschool expenditure. The first shows no relation, while
for the latter the positive relation is easily visible. The
source of this difference is obvious when one bears in
mind that preschool education is funded completely from
Gmina’s own revenues
Regression analysis Gmina Revenue and
School Spending
Regression analysis was used to test the hypothesis
whether the relation between Gmina revenue and
spending changed over time. This analysis showed that
there was no change in the relation between Gmina
school expenditure and revenue between 1998 and
2003. The regression analysis for preschool spending
showed that this relation became stronger for urban
Gminas.
Poverty and preschool expenditure
The vital question here is whether household income or
poverty is related to the level of preschool participation
and whether this relation changed with decentralisation.
Analysis per TU showed that poverty level is a very good
predictor of the preschool participation rate. The strength
and sign of this relation gives cause for concern. Clearly,
poorer TUs have smaller numbers of children in preschool
education, which lowers their educational opportunities.
Household spending
The expectation is that decentralisation allows for better
allocation of public funds at the local level, therefore it will
reduce household income inequality; however, the
opposite is also likely to occur when subsidies end up at
higher income households. Study showed that Gmina’s
expenditure on primary education has a visible, however
small, equalizing impact on household income (total
expenditure). It seems that this effect has been positive,
meaning that the equalizing effect of public spending
slightly increased. One of the reasons of this effect is a
quite stable pattern of spending on primary education.

38 Impact of Decentralisation
39 Impact of Decentralisation
5. Impact of
Decentralisation in the
Health Sector
Figure 26.household and subnational government health
This Chapter expenditure per capita

Given the scarce data available, the impact of

decentralisation in the health sector is only examined in
terms of efficiency (expenditure) and equity.
Furthermore, one has to take into account that public
expenditures presented in this chapter include only
spending of sub-national governments, neglecting a major
part of the public health expenditure financed by the
central budget (before the reform) or by insurance funds,
i.e. “Kasy Chorych” and “Narodowy Fundusz
Zdrowia” (after the reform). But it should be
remembered that sub national government responsibility
is really marginal and almost all funds are transferred
directly to service providers.
Analysis of the efficiency concentrates on the examination
of private expenditure. It begins with the comparison of
private and public expenditure over the six year period Figure 27 displays Gmina health expenditure. One should
1998 – 2003. notice that it is very low indeed: median spending in of
The equity question is approached through the joint Gminas is about 10 PLN per person per year. Quick
analysis of poverty rates and Gmina expenditure for 73 comparison with the earlier figures and data in the annex
territorial units. This analysis however is only sketched and shows that there are a few Gminas with exceptionally
should be treated as an exercise rather than fruitful high levels of spending but most of them spend very small
examination. amounts of money on health. Clearly, rural Gminas spend
less and the level of overall sub national health
Contents expenditure has been decreasing in the investigated
period. Decrease in spending in recent years is due to the
5.1 Health, efficiency and public spending health reform which gave most financing responsibilities
5.2 Health, efficiency and the Household perspective to public contractors (see section II on this).
5.3 Health and Equity Figure 27. Gmina health expenditure per inhabitant
5.4 Summary 1998-2003

5.1 Health, efficiency and public

spending

Gminas Expenditure in Healthcare

Decentralisation in the health sector was introduced by
the health care reform in 1999, in combination with other
important policies: establishment of health insurance
funds, introduction of competition based on internal
markets (some prefer to call them quasi-markets) and
privatization. Gminas’ role in the health sector has
remained quite limited and the same is true for other
tiers of decentralized government. Therefore, it is not
surprising that the sub national government expenditure is
much smaller, and education and household expenditure
are several times bigger. This is pictured in Figure 26
below. 5.2 Health, Efficiency and the Household
Perspective
Methodology and hypothesis
The analysis of household expenditure on health covering
the period 1998 – 2003 may give indirect evidence of the
1999 reform efficiency from the beneficiary perspective.

40 Impact of Decentralisation
The methodology used is similar to the approach already 90
explored for the investigation of the efficiency impact of
the reform in the education sector. First private 85
(household) expenditure on health is examined using
simple statistics based on HBS, and next the impact of 80
sub-national spending on household expenditure is
75

Percent
analyzed using regression functions estimated on the HBS
and BDR combined. This time, however, the analysis is less
70
comprehensive, given both the scarcity of data regarding
health in HBS 32 and the territorial unit considered.33 65
Working hypotheses may be formulated in the following
way. It might be expected that efficiency effects of the 60
health reform implemented in 1999 would be positive, for
55
example, at the very least, beneficiaries in worse
economic conditions (the poorest, living in rural areas) 1998 1999 2000 2001 2002 2003
would spend less on the health treatment. This might Year
result from the new fiscal arrangements better adjusted Qunitile 1
to the local needs. These effects, however, might not occur Quintile 2
with regard to the expenditure on medicaments. It seems Quintile 3
Quintile 4
that the cost of medicaments is not responsive to the Quintile 5
decentralisation of health care financing. Overall, the
efficiency impact of the reform from the household Fig. 29. Incidence of household expenditure on health, 1998
perspective would possibly be very small. - 2003 by consumptiom

Household expenditure Mean expenditure

Expenditure on health recorded in HBS includes goods
(mainly medications) and services (in-patient and out-
patient treatment received in public and private clinics). In
case of goods, money value of free or subsidized
medicaments received on prescription has been
considered as expenditure in-kind. Given the information
available in HBS, this part, however, cannot be identified. In
this sub-section, total health expenditure is analyzed,
expressed per capita, in constant 1998 prices (deflator:
overall CPI).
Overview of changes of the household expenditure on
the health care in 1998 – 2003 regards both the
incidence and the mean expenditure, for the whole
population, by quintile groups and by place of residence.
Main statistics are displayed in the Annex Tables ATH1-
The level of household health expenditures is
considerably higher than the level of education
expenditure. In 1998- 2003, an average private
expenditure on health was equal to over PLN 20 per
capita (in constant prices, per month), making over 4% of
the total household expenditure (see Figure 29, Annex
Table ATH2). Over time, this expenditure slightly
increased both in absolute and in relative terms (from
4.2% up to 4.8% on the average), and this increase was
more pronounced at the end of the period under
investigation. This means that health care became more
expensive from the point of view of households, more
visibly in 2002-2003.
30.00
PLN98, per capita per month

ATH3. Some of them are presented graphically (Figure 28

– 32). 26.25

Incidence ratio
First, notice that the share of households actually spending 22.50
on health is rather high and very stable. Each year, this
share was equal to 80% overall, 78% in rural areas and 81 18.75
– 82% in urban areas (Figure 27, Annex Table ATH1).
Nothing has changed with this respect over time. The
expenditure incidence has always been very similar in the 15.00
fourth and fifth quintile groups, and it was significantly 1998 1999 2000 2001 2002 2003
lower for the poorest households (first quintile). It is Year
worth noticing, that the expenditure incidence diminished
Rural Urban
only for households in the first quintile group, and it
increased for the two highest groups (, Annex Table Fig. 30. Household expenditure on health, 1998 - 2003 by
ATH1). This finding needs further examination involving place of residence
the changes of the amount spent as well as the distinction As in the case of education, rural and urban households
between expenditure on goods and on services. differ as far as the level of expenditure is concerned, the
Otherwise, it would be hard to interpret. former having spent less in absolute terms.

32 HBS does not provide any information on the health status of household members nor on the health
treatment undertaken.
33 Health financing by Gmina represents only a very small fraction of the total public spending on the health

care, and is not really important.

41 Impact of Decentralisation
 But health expenditure in relative terms is quite similar in
rural and in urban areas. At this point it is hard to say
what the reason for lower spending of rural households
may be: either demographic or financial factors, or maybe
more difficult access to health care?
PLN98, per capita per month
20
15
10
5 this expenditure has very little to do with decentralisation
0 Nevertheless, the attempt has been made to estimate the
1998 1999 2000 2001
Year
Goods (medicaments etc) Out-patient care
Fig. 31. Household expenditure on health by type, 1998 -
2003
The analysis of health expenditure by type (Figure 31,
Annex Table ATH2) suggests that this is rather not the
problem of access. Households spend mostly on
medications not on the health treatment, so access to
services cannot be a primary reason for differences in
expenditures. In 1998, expenditures on medications made
almost 60% of the total household expenditure on
health. This share was almost the same for rural and for
urban households, and it has grown considerably over
time, reaching over 70% in 2003. During this six-year
period, household expenditure on out-patient care
declined, both in relative and in absolute terms. This may
be a positive effect of the reform implemented in 1999.
Private expenditure on the health care is quite
differentiated, reflecting also household economic status
(Figure 32 and Annex Table ATH3). While in the lowest
quintile monthly expenditure is in the range of PLN 6-7
per capita. In the highest quintile group it amounts to
over PLN 30 or 40. In 1998 – 2003, expenditure in the
lowest quintile group declined while in the highest it
increased. Changes were not very pronounced, quite
possibly, because they have been pushed up by the
expenditure on medications, and not so much by policies
implemented by the reform of 1999.
Gmina expenditure impact on private
spending
34
This change may be read from the description of the BDR data. It is hard to say whether it is due to the
modification of Gmina responsibilities or results from the modification of budgetary statistics.
42
Once again the regression analysis is used for detecting
the impact of the health reform on private health
expenditure. This time, however, the analysis cannot be
properly developed for several reasons. First, the focus of
this research is on Gmina expenditure. Neglecting powiats
and health insurance funds is a serious obstacle. Second,
1998 and 2003 data cannot be reasonably pooled with
Gmina expenditure among regressors for there were
major changes in the concept of this expenditure. 34 Third,
the very nature of the household health expenditure in
Poland, just discussed, shows that from the household
perspective expenditure on medications counts first, and
and Gmina policies.
2002 2003 function of household health expenditure with the
appropriate set of independent variables for 1998 and
Hospital, sanatorium
2003, separately. This time, logarithmic function has been
used. In fact other formulas simply have worked.
Dependent variables have been adjusted for the main
purpose of the analysis. Therefore, it includes only
household expenditure on health services, and neglects
expenditure on medications. Besides the usual regressors
(total household expenditure, education, place of
residence) one variable indicating the number of
household members over 75 (age was chosen arbitrary)
was also introduced. Two regressors representing Gmina
policies have also been introduced, that is health care
expenditure per capita and, as before, the mix of this
variable with household poverty indicator. Results are
presented in Table 8, below, and in Annex Tables ATH1regr
and ATH2regr (detail)
Impact of Decentralisation
Table 8 Figure 33. Gmina revenues and health expenditure
Logarithmic regressions of household expenditure
on health, 1998 and 2003

Dependent var:
hh health exp (selected 1998 2003
items), pc
age of hh head 0.071 0.042
hh members age 75+ 1.977 1.563
Education: high 3.455 5.173
Education: secondary 1.076 1.116
hh exp pc 9.796 10.354
Gmina exp health pc -0.240x -1.447
poor*Gmina health pc 1.465 2.622
_cons -54.188 -59.225
Number of obs = 31756 32452
R-squared = 0.083 0.080 Household Expenditures
Adj R-squared = 0.083 0.079 Finally, a merged BDR+HBS dataset was used to relate
household characteristics to Gmina health expenditure.
Note: Figure 34 below suggests that during the years 1998-2003
the (negative) relation between poverty rate and average
All non-tagged coefficients are significant at less than 1% level.
Coefficients marked with x are significant at 5%. Highlighted health spending has weaken in 73 territorial units.
variables/coefficients are of a special interest. Highlighted are However, it is hard to see any effect of decentralisation
coefficients/variables of special interest. Exp stands for here, except the diminishing role of Gmina during that
expenditure, pc for per capita, hh for household. See Annex period. In fact, Gmina expenditure after 1999 became so
tables for detail.
low that the empirical findings regarding the change in
Source: variation should not be treated as meaningful.
HBS + BDR, own computation.
Figure 34.Poverty rate and health expenditures
Estimation results are not satisfactory. Although all
coefficients are statistically significant and analytically
correct, goodness of fit of the estimated function is
extremely low, both for 1998 and for 2003. The
coefficient of Gmina health expenditure variable is
negative, meaning that the higher local expenditure of
Gminas, the lower private health expenditure (if
households keeping all other variables constant).
Coefficients of 1998 and 2003 regressions differ
considerably but this may result from the change of the
concept of Gmina expenditure in BDR and not
necessarily form the change of financing implemented by
the 1999 reform. It should also be noticed that - contrary
to the results for education - coefficient of Gmina exp
variable for the poor households (poor*Gmina health
exp) is positive. This means that the poor do not benefit
as much as the non-poor from the health care financed
by Gminas. One should remember, however, that the
above empirical findings are in fact not very strong.

5.3 Health and Equity

Revenues and expenditure
In order to test inter-jurisdictional equity, Gmina revenues
were related to health expenditures, and after the same
was done concerning poverty rate and health
expenditure. Figure 33 below shows that revenues are
indeed correlated with expenditures and the relation is
more visible for urban Gminas than for rural ones.
However, after 1998 this relation is weaker due to lower
levels of Gmina spending on health.

43 Impact of Decentralisation
5.4 Summary

In 1999, the decentralisation process took off. Gminas’

role in the health sector has remained quite limited and
the same is true for other tiers of decentralised
government
Efficiency
Household was analysed through a regression function.
The hypothesis was that the efficiency effects of the
health reform implemented in 1999 would be positive, for
example, at the very least, beneficiaries in worse
economic conditions (the poorest, living in rural areas)
would spend less on the health treatment. Study has
shown, that the share of households actually spending on
health is rather high and very stable; nothing has changed
from this respect over time.
The level of household health expenditures is
considerably higher than the level of education
expenditure. Health care became more expensive from
the point of view of households, more visibly in
2002-2003. Changes were not very pronounced, quite
possibly, because they have been pushed up by the
expenditure on medications, and not so much by policies
implemented by the reform of 1999.
Equity
Revenues are indeed correlated with expenditure and the
relation is more visible for urban Gminas than for rural
ones. However, after 1998 this relation is weaker due to
lower levels of Gmina spending on health. However,
Gmina expenditure after 1999 became so low that the
empirical findings regarding the change in variation should
not be treated as meaningful.
Limitations
The research of impact of decentralisation on the health
sector is limited by: First, the focus of this research is on
Gmina expenditure. Neglecting Powiats and health
insurance funds is a serious obstacle. Second, 1998 and
2003 data cannot be reasonably pooled with Gmina
expenditure among regressors for there were major
changes in the concept of this expenditure. Third, the very
nature of the household health expenditure in Poland, just
discussed, shows that from the household perspective
expenditure on medications counts first, and this
expenditure has very little to do with decentralisation and
Gmina policies.

44 Impact of Decentralisation
45 Impact of Decentralisation

6. Main findings and
conclusions
Findings and conclusions that may be drawn from this
research regard both factual and methodological issues.
They will be discussed below. The discussion begins with
the summary of the main empirical results, reported from
the point of view of two actors; local government and
household. It is followed by comments on data sources
and methods, pointing at some weaknesses and strengths
of the analysis.
The findings summarized below take into account the
local government (Gmina) perspective as well as
household perspective, and they regard two sectors of
social services, education and health care. It should be
noticed, however, that given the very nature of the
1999/2000 reforms and data constraints, results regarding
education sector are more comprehensive and reliable
than findings that consider the health care.
Empirical Findings
Education, Public Spending
Accessibility and Efficiency.
Sub national government fiscal data show that the impact
of reforms is noticeable, with a sharp decrease of
expenditure, in 2001. Interpretation of these figures
requires to look beyond solely the decentralisation
reforms. This change is mainly due to the decrease in
school expenditure, while preschool expenditure rose
gradually, without any dramatic changes.
After the implementation of the 1999/2000 education
reform, between-Gmina variations of primary school
expenditure slightly decreased, whereas just the opposite
is true in the case of preschool education. While full
assessment of growing variation of preschool expenditure
has not been possible, the results suggest that education
reform unintentionally limited Gmina potential to increase
support for kindergartens. The missing opportunity, -
created by the population decline-, to improve preschool
participation levels, could be seen as a major negative
outcome in the education sector during the studied
period.
Equity
An analysis of equity based fiscal data shows a weak
positive relationship between school expenditure and
Gmina revenue (a proxy of Gmina wealth). This relation
was smilar both at the beginning and at the end of the
studied period. In the case of preschool education, the
positive impact of Gmina wealth on expenditure is also
found, but regression analysis revealed weak evidence that
this relation became even stronger in 2003 compared to
1998. Overall, the claim has been made that reforms had
a negative impact on inter-jurisdictional equity in
preschool expenditure.
46
Accessibly and Poverty
It has also been shown in 73 territorial units, set up in this
research for combining BDR and HBS datasets, that
participation in preschool education is strongly correlated
with poverty rates. Results prove that in the case of
preschool accessibility, Gmina and household economic
status play an important role. The negative relation
between preschool expenditure and Gmina revenue, as
well as between household poverty and accessibility of
preschool education, should not be overlooked by policy-
makers responsible for developing programs to increase
educational opportunities and fight poverty.
Education, Household perspective
From the household perspective, impacts of reforms are
visible, but they do not look very significant, certainly, they
cannot be treated as a ‘shock’. Main empirical findings that
concern these impacts may be summarized as follows.
Accessibility and preschool enrollment
Decentralisation and the reforms of 1999/2000 have not
changed low levels of preschool enrollment. Although
enrollment at kindergarten slightly increased in 2003 as
compared with 1998. Probit estimates based on
household budget surveys and Regional Data Base (HBS
+BDR) show that this increase cannot be treated as an
effect of decentralisation, but it should be attributed to
some other causes. Quite possibly these causes are
connected with the improvement of economic conditions
and the change in the social situation of the non-poor
households.
Poverty
In general, Gmina expenditure on kindergarten has a
positive impact on the preschool enrollment rate, or -
strictly speaking – on the probability of sending a child to
kindergarten. This impact, however, is much weaker or
even negligible for the poor households. This has been
shown by the probit analysis using mixed HBS and BDR
data for 1998 and 2003.
It is hard to detect any visible impact of reforms either on
the household expenditure on education, on the cost of a
child at kindergarten or a student at elementary school.
Effiency
Household expenditure on education has always been
very low, both in absolute and in relative terms. It has
slightly increased since 1999 but this growth was gradual,
with no ‘jumps’ or breaking points giving evidence of
almost no impact of 1999 reforms. This increase was
mostly due to the expansion of spending on higher
education, and it regarded mostly the most affluent
households (fifth quintile group). Certainly, it cannot be
associated with the decentralisation and reform of
1999/2000.
The household cost of a child at kindergarten increased
steadily in 1998 - 2003, showing no one-time impact of
the decentralisation. Private expenditure per one enrolled
child has been always much higher in urban than in rural
areas and this discrepancy became more pronounced
over time. But, once again, there are almost no signs of the
reform.
Impact of Decentralisation
Results of the regression analysis reinforce the conclusion
regarding the weak efficiency impact of the 1999 reform,
at least from the household perspective. Estimation results
based on HBS supplemented with BDR data show that
elasticities of household education expenditure with
regard to Gmina fiscal variables are negative, and they
slightly changed in 2003 as compared to 1998. In both
years elasticities were lower for the poor population,
showing a stronger influence of Gmina policies on the
poor, but the impact of the 1999 reform was statistically
insignificant.
Regression estimates also show that elasticity of the
household cost of a child at kindergarten with respect to
Gmina expenditure is positive, meaning, in short,, that this
cost is higher in the richer Gminas. Elasticity was slightly
higher in 2003 than in 1998 but, as it might have been
expected, the difference was really very small. It should
also be noticed that in both years the impact of Gmina
expenditure on the cost born by the poor and non-poor
households has always been identical.
As shown by the imputed income analysis, Gmina
expenditure on primary education has a visible equalizing
impact on household income (total expenditure). This
may be seen through the concentration coefficients,
quintile shares of public spending as well as through the
ratio of imputed subsidy to the actual household
expenditure. The decentralisation of 1999 had a very
small effect on household inequality. One of the reasons
for this effect is a quite stable pattern of Gminas’ spending
on primary education. Nevertheless, it seems that this
effect has been rather positive, meaning that the
equalizing effect of public spending slightly increased.
Health Sector
As far as the health sector is concerned, fewer conclusions
may be drawn. Fiscal data confirmed a minor role of
Gmina in the financing of health care services. Gmina
expenditure even decreased during the studied period.
This was due to the health reform which devolved state
institutions giving financial responsibility to health insurers
who were made responsible for contracting services
directly with providers. Thus, while decentralisation
occurred, the role of sub national governments after the
reform became negligible.
Expenditures
In 1998-2003, household expenditure on health care -
much higher than education expenditure - slightly
increased both in absolute and in relative terms, and this
increase was more pronounced at the end of the period.
This regarded mostly expenditure on medications, while
expenditure on out-patient care slightly decreased. These
tendencies were rather smooth, showing that the reform
of 1999 was not that important from the household
perspective.
The household health care expenditure has always been
quite differentiated, non-rural households have spent
more than rural, and the non-poor more than the poor.
While the rural-urban discrepancy remains stable,
differentiation with respect to the household economic
status increased.
Equity
As shown by the regression analysis, Gmina health
expenditure diminishes household expenditure.
47
Coefficients of 1998 and 2003 regressions differ
considerably but this may result from the change of the
Gmina expenditure aggregate and not necessarily form
the change of financing implemented by the 1999 reform.
It should also be noticed that - contrary to the results for
education – the coefficient of the Gmina expenditure
variable for the poor households is positive. This means
that the poor do not benefit as much as the non-poor
from the health care financed by the Gminas. Again, the
conclusions here should be treated in the light of a
methodical illustration, since more research on this topic is
needed.
Methodological issues
The impact assessment of decentralisation in social
service sectors on service accessibility, efficiency and
material inequality has been done using carefully adapted
methodology. It has been based on three main
assumptions.
Assumptions
First, decentralisation is a long lasting process of moving
power to sub national governments, but it is marked with
some peaks which should be paid special attention. In the
Polish case, such a peak occurred in 1999/2000.
Second, in order to study the various impacts of
decentralisation, data covering service providers as well as
surveys of ultimate service users are needed. In this study,
official statistics from Regional Data Banks regarding
Gmina (the lowest level of the sub national government)
and Household Budget Surveys have been seen as the
most appropriate data sources.
Third, in order to single out and properly measure the
effects of decentralisation reforms, empirical analysis must
go beyond the exploration of simple statistical indicators
over time. Regression analysis and examinations of
imputed household income, from both public subsidy
carried out on sub national data and household surveys
combined, have been seen as the best analytical tools in
this case.
Shortcomings
The implementation of the approach just summarized has
been successful but it has also revealed various
shortcomings. They concern, first of all, the data, namely
their completeness and comparability. They also involve
the question of proper and valuable data linkage.
Profound reforms, such as those introduced in 1999, make
a challenge for agencies responsible for collecting and
processing statistical information. It concerns mainly
conceptual issues and timing. In this research, problems
regarding concepts of statistics and their completeness
have been encountered. For instance, proper information
on secondary education, split into lower and higher levels
in 1999, has been introduced in household budget surveys
with an evident delay. The same regards information on
enrollment in non-public schools (payable). On the other
hand, statistical information on Gmina expenditure on
kindergarten after 2000 is missing in the Regional Data
Bank, although aggregated official statistics include this
item. This may be the result of changes in the budgetary
legislation regarding new categories of fiscal statistics.
Impact of Decentralisation
These difficulties have been solved using additional data
sources and proxies. Such data problems make findings of
the empirical investigation less accurate, but are possibly
inevitable in this type of research.
Certainly, there are also data problems which are inherent
in any statistical investigation. Lack of important statistics,
various gaps in information, or incomparability resulting
from implementation of new statistical concepts may be
given as examples. In this research, such problems have
regarded mostly household budget surveys. HBSs are well
fed with expenditure data and provide a variety of
statistics regarding the education sector (enrollment,
education status etc) but they are rather insufficient with
respect to the health care sector. HBSs are also lacking
any information on service quality, health care accessibility
and the use of medical care or background information
on health status of household members. This has limited
the scope of the research. Certainly, data scarcity
problems may be solved by the use of additional surveys
such as public opinion surveys, LSMS (in the Polish case,
so called Social Diagnosis surveys) or modules
supplementing regular household budget surveys. But
given a pilot nature of this study, such options have not
been implemented. Certainly, future research should
consider exploration of more abundant data sources.
The method used for combining information from two
different data sources has also revealed shortcomings and
makes empirical results less appealing. Both sources have
been linked through 73 territorial units (TU), with
territorial characteristics available in both datasets. Every
unit represents a Gminas group, and mean figures for
each TU have been explored. Such a way of data link and
data exploration limits considerably differentiation among
sub national governments which in fact is the heart of the
decentralisation pattern. This can be avoided through the
use of surveys designed especially for the research
concerning the impact assessment of decentralisation.
These surveys should provide more precise information
on the place of residence of service users. Such a
solution, however, has remained beyond the scope of this
study.
Finally, one should remember that the whole research has
regarded only one tier of sub national government
involved in the decentralisation process (Gmina),
neglecting the other two tiers (powiat and voivodship).
This may be justified on conceptual and empirical
grounds, but it certainly makes results less
comprehensive. The role of powiat, voivodship and other
sources of decentralized public funds (e.g. regional health
insurers) should necessarily be covered by future
research.

48 Impact of Decentralisation
Impact of Decentralisation

Annex I: Research
Methodology
Period, administrative level and sub-sectors under
investigation
Years
Period for the instigation is chosen in order to ensure
proper coverage of the decentralisation process in
education and health sectors but it also considers data
availability.
Development of the decentralisation process in Poland
over the last decade clearly indicates what years should
be selected for carrying out the core statistical
investigation. The research should start before 1999,
where major decentralisation reforms peaked, and it
should penetrate a few years after this peak. For this
study, a five-year research period covering 1998 – 2003
has been chosen, and this choice reflects mainly data
availability. The lower bound of the period results from a
lack of necessary statistical information on new
voivodships before 1998. The higher bound reflects
accessibility of the latest statistics. However, for some
research questions empirical analysis is extended to 1996
– 2005, and overview of the decentralisation process goes
back to the beginning of the nineties when the
decentralisation process began, following transformation
of the economic and political system.
Administrative level
At present, there are three tiers of subnational
government in Poland: Gmina, powiat and voivodship.
Gmina is the lowest tier. About 2500 Gminas were
established in 1990 and this number slightly changed
during the period of transformation. In 2005, there were
2478 Gminas from which 307 urban, 1591 rural and 580
mixed (rural/urban) Gminas. The smallest Gmina has less
than 1500 inhabitants, the biggest one has more than 1.5
million (capital city, Warsaw). Most Gminas have from 5 to
10 thousand inhabitants.
In 1999, a major administrative reform introduced the
middle tier, powiats, and scaled down the number of
voivodships (which earlier were only regional branches of
central government) establishing subnational government
at this level. In 2005 there were 314 powiats and 16
voivodships. Most powiats have from 80 to 100 thousand
inhabitants and voivodships have from 1 to 5 million
inhabitants. Additionally, there are 65 city-powiats which
are the biggest cities comprising the tasks of Gminas and
powiats.
This research concentrates on the analysis of
decentralisation at the Gmina level (including city-powiats
for a technical reason). There are several arguments in
favor of limiting investigation to Gminas, both conceptual
and empirical. First, Gminas constitute in fact a core level
of subnational government, with an important influence
on the public service provision. They are also, in a sense,
the most interesting from the point of view of the main
purpose of this study. Second, Gminas are much
differentiated with regard to their expenditures and
provision of social services.
This certainly makes the investigation easier and sounder.
Third, Gmina were established at the very beginning of
transformation and, therefore, one can presume that main
effects of long-term policies and long-lasting differences
are all revealed. Fourth, data necessary for analyzing
impacts of decentralisation in education and – to some
extent – in the health sector are better suited for the
investigation at Gmina than at powiats or voivodship
levels. Fifth, last but not least merging BDR and HBS
datasets to perform analysis of Gmina expenditure gives
73 observations (see explanations given below). If one
wants to perform similar analysis on merged data focusing
on voivodships or powiats only 32 categories could be
constructed which importantly limits the possibility of
statistical inference.
Sub-sectors
Focus on Gmina indicates the area of investigation. As far
as education is concerned, the most important role of
Gmina consists in financing and governance of
kindergartens, primary and lower-secondary schools.
Thus, these levels of education are paid special attention.
Moreover, specific analytical tools are needed for analyzing
each education level because the research questions they
open differ. For instance, education in kindergarten is
neither free nor obligatory. Therefore, while in this case
impact of decentralisation on enrollment rate and on
household expenditure can be studied this would be
irrelevant in case of obligatory and free primary public
education.
In the health sector, the role of Gmina is quite limited. In
fact, a comprehensive analysis of the health sector should
consider other levels of subnational governments, powiats
and voivodships, and - certainly - the insurance fund(s).
Therefore, investigation regarding this sector presented in
the report should be treated as a methodological
exercise. It cannot provide sound policy-relevant results.
Data source and methods
Data
Two main data sources are used in this research:
(1) Regional Data Bank (Bank Danych Regionalnych or
BDR),
(2) Household Budget Surveys (HBS).
Both datasets are maintained by Główny Urząd
Statystyczny (Central Statistical Office, GUS). However,
they are quite different in nature and can not be analyzed
together in a straightforward way.
Regional Data Bank (BDR) contains a few thousand
variables aggregated to the level of subnational
governments (in some cases with the rural/urban split). In
this research data on Gmina expenditures and revenues
(fiscal data), number of students in schools, class sizes,
number of kids in kindergartens (school system data), and
some characteristics of the health services have been
explored. The use of BDR needs some comments
regarding time coverage and concepts. At this moment,
BDR data are available for the period of 1995-2004 but
some data cover shorter periods. In such cases, they have
been supplemented with Ministry of Finance datasets on
subnational budgets. This regards, first of all, expenditures
on kindergartens which do not go beyond 2000 in BDR,
and were completed for 2001-2003 with MoF data.
Impact of Decentralisation
Moreover, in case of some variables – such as health
expenditure - conceptual changes were implemented by
GUS over time. Therefore, some results should be treated
with caution.
Household budget surveys (HBSs) are conducted every
year for over two decades. Each year, the HBS sample
contains over 30,000 households or 100,000 individuals.
Every household is surveyed for one month; so in fact,
annual sample consists of 12 monthly sub-samples of fairly
equal size (over 2,500 households each). HBS sample is
representative for virtually whole population, excluding
those who live with foreigners or outside 'standard'
households (in dormitories, welfare homes etc). Data over
the period 1998 – 2003 are comparable although some
methodological changes were implemented every year.
HBSs provide data on household incomes (by various
sources), expenditures (over 200 items), type of
residence, housing conditions, durables, land area (if any)
etc. Rather detailed information is also given for each
household member: age, sex, education, relation the
household head, individual source of income. At the
household level, various categorizations submitted by
CSO are also available. They include co called socio-
economic category of a household (7 categories
according to the main source of income), family type
(over 10), place of residence (6 groups), etc.
The analysis of education and health sectors requires
additional comments regarding HBS data. Education data
are richer than those regarding health, the former cover
enrollments and expenditures, while the latter are limited
to expenditures exclusively.
Health expenditures include two groups, consisting of
identical items over the whole research period: goods
(four items - medicaments, various instruments etc.) and
services (seven items, i.e. out-patient care, treatment at
hospitals etc).
Education expenditures include expenditures on services
(from nine in 1998 up to twelve in 2003 items) and on
goods (four items such as textbooks, copybooks etc).
Services are grouped by the education level and the type
of service (fees of service at school or out of school).
Expenditures on books, copybooks etc. cannot be
assigned to the education level. Moreover, HBSs do not
include information on expenditures involved with child/
student transportation to the school.
Data regarding enrollment are recorded by the school
level and by the school type. As for the school level,
information is almost identical over the whole period
under investigation. The school levels include: elementary
(primary), lower secondary or gymnasium (except 1998),
vocational, secondary general, secondary vocational, post-
secondary and higher (university level). It should be
noticed that no information about pre-school enrollment
is available. Therefore, pre-school enrollment or the ‘use’
of kindergarten should be established on the basis of
expenditure alone.
The type of school recorded in HBS differs depending on
the year. In 1998 – 2000, this type indicates regular or
extra-mural school, while in 2001 – 2003 additional split
private – public has been added.
The latter is not very important from the point of view of
this research, because more than 98% of students in
comprehensive schools are in public system.
Combining fiscal and household data
Measurement of some important impacts of
decentralisation – such as poverty impact for instance -
requires the use of combined datasets merging
subnational fiscal data with household surveys. The
merging process has been done in the following way.
Given the information available in HBS, each household
may be located according to the following territorial
characteristics: (i) voivodship, (ii) area of residence, rural
or urban, the latter with the indicator of the urban size
according to the number of inhabitants (under 20,000;
20-100; 100-200; 200-500; above 500,000).
Since there are 16 voivodships in Poland and 6 types of
the place of residence are recorded, maximum 96
territorial units might be set. In fact, only 73 territorial
units (TUs) exist because in some voivodships cities of a
particular size do not exist.
HBS and BDR datasets have been merged through these
73 units. BDR fiscal variables (expenditures) expressed as
means of subnational governments for 73 TUs have been
added to household records in HBS. Also, BDR has been
supplemented with HBS statistics, i.e. means for 73 TUs.
Using statistical information on 73 TUs instead of 2,500
Gminas involves a substantial loss of information regarding
variation within Gminas. The same is true in the case of
aggregated household data. However, this is the only way
to merge HBS and BDR datasets.
Basic background information about 73 TUs is displayed in
three tables enclosed at the end of this Annex. Table M1
shows household distribution by 73 TUs in two years
which are paid special attention. It may give some idea
regarding representativeness of HBS data with respect to
the territorial units explored. Tables M2 and M3 show the
number of Gmina in each territorial unit in 1998 and
2003 respectively. These numbers may give an idea
regarding the loss of information on Gminas’
differentiation which results from the use of mean
statistics for 73 TUs instead of raw statistics for Gminas.
Measurement issues
Impact dimensions considered
In general, three impacts of decentralisation have been
studied: accessibility, efficiency and equity. Given the data
scarcity, only efficiency and some aspects of equity were
approached in case of the health sector. Education sector
has been explored at length, with a special attention paid
to preschool and primary schools. For the purpose of the
empirical investigation accessibility in the education sector
has been measured through enrollments, efficiency
involved analysis of costs and expenditures, equity -
examination of poverty and inequality impacts. Certainly,
sometimes these three aspects overlap, nevertheless the
attempt has been made to analyze them separately.
Specific analytical tools
Three major tools of the empirical investigation have been
used, adapted to a given aspect of the analysis. The first
one consisted in the exploration of selected indicators
over the decentralisation period.
Impact of Decentralisation
Sometimes these indicators were derived from one data
source, either BDR or HBS, but usually appropriate
statistics from both sources were combined. The second
tool involved regression analysis conducted only for BDR
fiscal data in a rather traditional approach, but also
conducted either for 73 TUs supplemented with HBS
averages, or for over 30,000 households supplemented
with TU average statistics. Finally, the impact of imputed
public subsidy (BDR) on household material inequality
(HBS) has been explored.
Accessibility and quality
Proper quality measures in education and health sectors
are not available in considered datasets. In general,
recipient opinions might provide a good ground for
setting and analyzing indicators of service quality but such
information is not recorded in Polish HBS. This type of
analysis would require using some other data source, such
as public opinion surveys, Social Diagnosis or Polish
General Social Survey. On the other hand, the analysis of
education quality is usually done based on achievement
test. However, external examination system was launched
in Poland in 2002 after major reforms and
decentralisation. Full analysis with value-added measures
of school effects is possible but cannot cover the period
studied here.
Therefore, the solution adopted involves the use of some
proxies of service quality which allow for testing whether
decentralisation and reforms had any impact on service
quality and accessibility. For instance, since data on class
size and on public expenditures per student are available
in BDR, changes of these indicators during the period of
decentralisation may be used as proxies. Such an
approach has been implemented in this research.
The impact of decentralisation on accessibility is of
importance for some services that are not obligatorily
delivered. In this respect, the question whether
decentralisation has any impact on preschool education
accessibility is a very important one. This impact has been
assessed by looking at variation in preschool education
availability between local governments during the
decentralisation period. Moreover, given that service
availability is especially important in rural areas where
transportation costs limit the service use (affecting
especially poorer households), separate analyses for rural
and urban areas have been run, whenever applicable.
Additionally, probit regression analysis based on HBS
supplemented with BDR data has been used. Probit
functions for preschool enrollment (or, strictly speaking,
for probability of sending a child to kindergarten) with a
special set of regressors have been estimated for 1998,
2003 and for polled 1998+2003 data. Given a special set
of regressors, estimation results allow to test whether (i)
probability of going to the kindergarten depends on
Gmina expenditure, (ii) whether this probability is the
same for poor and non- poor households, and (iii)
whether Gmina impact has changed after the 1999 peak
of decentralisation.
Efficiency
One can conjecture that decentralisation will increase
efficiency of local service delivery. However, testing this
presumption empirically is quite difficult and regarding
datasets explored in this study is nearly impossible.
To assess the impact on allocative efficiency good
measures of service quality and local preferences are
needed. Neither of these is available. Using proxy
measures of service quality to assess efficiency can be
very misleading. We are not able to distinguish between
change in efficiency and change in preferences. For
example, we do not know whether an increase in cost
delivery in a particular jurisdiction reflects lower efficiency
or effects of local policy fulfilling high expectations of
citizens. That is the reason we do not assess allocative
efficiency in this study.
Based on the data available, one can assess the change in
technical efficiency in educational services asking whether
the cost of services increased or decreased between
years. This can be done using data of subnational
government expenditures together with household
expenditures. Thus, overall trends of BDR and HBS
expenditures on education and on health comparing
levels before and after reform of 1999 have been
analyzed. Also, these indicators computed for 73 TUs have
been analyzed in order to see to see whether
decentralisation increased differentiation of service costs.
If this is true then one can presume that decentralisation
has an impact on efficiency but, certainly, more detailed
analysis would be still needed here, especially with some
measures of whether quality of services did not change.
Next, regression analysis is applied in order to see
whether Gmina spending has any impact on household
education and health expenditures, and whether this
impact was different before and after reforms of
1999/2000. Also, a test regarding a difference of this
impact on poor and non-poor households has been
carried out. This analysis has required using both HBS and
BDR data, and running regressions with specific
independent variables on at least two years, one before
and another one after the decentralisation. In this case,
1998 and 2003 have been selected for testing
decentralisation impact.
Equity
One of the main objectives of this study is to assess the
distributional impact of decentralisation. There are two
important dimensions of distributional effects of
decentralisation: interjurisdictional equity and
interpersonal equity, and both of them are considered in
this research. Inter-jurisdictional equity can be assessed
based solely on subnational government data (BDR)
which provide statistics on resources and expenditures at
the local government level. In this research differences in
service availability and funding between different Gmina,
73 territorial units, or rural and municipal areas are
assessed. The increase of policy-relevant differences
between these jurisdictions or groups of tem can be
interpreted as a sign of decreasing interjurisdictional
equity.
To assess the effect of decentralisation on interpersonal
equity, the impact of Gmina expenditure on household
income inequality has been evaluated. This has been done
through the analysis of imputed income, implicitly
transferred to household from Gmina budgets. This
analysis has been based on HBS and BDR combined.
Certainly, the nature of the sub-sectors under
investigation and the data availability limits the analysis.
Impact of Decentralisation
In this study, imputation of public subsidy received by
households might have been reasonably done with
respect to primary schools and – with some limits – with
respect to kindergartens. Unfortunately, health sector had
to be excluded. Also, since HBS data on kindergarten
show some gaps regarding enrollment, imputation has
been applied for primary education exclusively. We have
proceeded as follows.
Imputation has been run for 1998 (pre-reform year) and
for 2003 (post-reform year). Moreover, each year,
imputation has been done using several versions of local
government spending: actual, according to the 73 TUs, and
simulated. Simulated versions included: (i) equal spending
at the national level, treated as a benchmark, (ii) equal
spending – separately – at rural and at urban level, and
(iii) exclusively for 2003 spending of 73 TUs according to
the distribution of 1998. Results have been examined
through quintile distribution as well as with the use of
concentration coefficients.
Price deflators
Almost all expenditure figures covering several years have
been expressed in constant prices of the beginning year,
with the use of the overall CPI. In other words, 1998 –
2003 expenditures have been expressed in PLN 1998,
and if 1996 – 2004 data have been considered, 1996 was
treated as a base year for CPI deflator. Few tables present
data in nominal prices but in that case they always include
special note.
One might consider using various CPI deflators,
depending of the sector analyzed. Such a solution has
been rejected for, both, empirical and conceptual reasons.
First, sectoral CPIs have not covered all necessary items
or periods. Second, this multi-CPI approach would make
investigation of efficiency involving cost analysis less
transparent. For example, we could eliminate any policy
effect from education expenditures deflated by sectoral
CPI if all expenditure in this sector changed in similar
manner.
Overall CPI deflator for 1998 – 2003, together with CPIs
for education and health sectors are displayed in Table M4
at the end of this annex. They show differences between
sectoral and overall CPIs. In general, sectoral deflators are
higher. It seems, however, that it is mostly due to the
increase of prices of goods not services (compare overall
CPI and that for health service).
Poverty measurement
Poverty measures are invoked many times in this
research. Household poverty indicator, combined with
Gmina expenditure, has been included as one of the
dependent variables the in the regression functions run
on HBS. Poverty headcount computed for 73 TUs has
been explored in the analysis entrenched in BDR.
Poverty has been measured in the following way. Poverty
line has been set at the level of 60% of the median
household equivalent consumption in 1998, and then it
has been kept constant in real term for the whole period
1998 – 2003, with the use of the overall CPI deflator. This
way of setting poverty line stems from the approach
developed by Eurostat.
Median consumption has been evaluated for individuals,
using proper HBS weights. Household consumption is an
aggregate computed by CSO.
It is equal to the total household expenditure plus
consumption in kind, covering mainly food and some
items received for free (such as social benefits, for
instance). Household consumption has been equivalized
with the use of the most popular ‘old’ OECD equivalent
scales that is: household head =1.0, child under 15 = 0.5,
other adult = 0.7. In order to neutralize within-year
inflation effect (important at the beginning of the analyzed
period), household consumption has been expressed in
constant (June) prices of a given year.
Each household with the equivalent consumption below
the poverty line has been treated as poor. This has
allowed establishing poverty indicator and computing
headcounts for urban and rural populations as well as for
73 TUs. Table M5 enclosed at the end of this annex
displays poverty rates in 1998 – 2003, by place of
residence. Given the methodology adopted, these rates
differ from the official statistics published by CSO.
Nevertheless they show the same tendencies: (i) increase
of poverty over the period 1998 – 2003, (ii) much higher
poverty rate in rural than in urban areas.
Consumption quintiles
In order to study equity impact of decentralisation, main
statistics computed on the basis of HBS have been
displayed and analyzed by quintile groups. Quintiles have
been set according to the household equivalent
consumption, just discussed. They have been computed
using weighted HBS.
Quintiles have been set for all individuals (household
members), i.e. each quintile group represents 20 % of the
whole population. Notice that the same overall quintile
groups have been kept for urban and rural populations.
This means that a quintile group in a rural or in urban
area does not cover 20% of population living in a given
area. It represents population of a given overall quintile
group living in urban or in rural area, respectively. Quintile
distribution of rural-urban populations and households is
displayed in Table M6 at the end of this annex.
Notice also that the names ‘household (hh) quintile’
‘expenditure quintile’ or ‘consumption quintile (group)’ are
used interchangeably in this report.
Impact of Decentralisation
Annex II References
GUS, Oświata i wychowanie. Annual publication, Central Statistical Office.
GUS, Budżety Jednostek Samorządu Terytorialnego, data for 2001-2004 (published in 2005) and 2002-2005 (published in
2006), Central Statistical Office.
GUS (2006), Narodowy rachunek zdrowia. Wydatki na ochronę zdrowia 1999, 2002, 2003. Central Statistical Office
Golinowska, S., M. Boni (2006), Nowe dylematy Polityki społecznej, Centrum Analiz Społeczno-Ekonomicznych, seria
Raporty CASE Nr 65/2006.
Jakubowski, M. (2006), Decentralizacja oświaty w Polsce – szanse i zagrożenia, in: Golinowska, Boni (red.), 2006, pp. 73-81.
Jakubowski M., Kozińska-Bałdyga A. ,(2005), Małe Szkoły – polska odpowiedź na wybrane problemy wiejskiej oświaty.
Wieś i Rolnictwo 3/2005.
Kowalska, I. (2006), Decentralizacja władzy a funkcje zdrowotne państwa, in: Golinowska, , Boni (ed.), 2006, pp. 82-89.
Levitas, T. (1999), The Political Economy of Fiscal Decentralisation and Local Government Finance Reform in Poland
1989-1999, USAID.
Levitas T., Golinowska S., Herczyński J. (2001), Improving Rural Education in Poland. CASE - Center for Economic and Social
Studies, Warsaw.
Levitas, T., Herczyński J. (2002), Decentralisation, Local Governments and Education Reform in Post Communist Poland, in:
K. Davey (ed.) Balancing National and Local Responsibilities. Education Management and Finance in Four Central European
Countries, OSI/LGI Budapest.
Ministerstwo Zdrowia [Ministry of Health] (2004), Finansowanie ochrony zdrowia w Polsce – Zielona Księga.
Regulski, J. (2003), Local Government Reform In Poland: An Insider's Story, OSI/LGI.
Styczeń, M., I. Topińska (1999), Podatki i wydatki socjalne jako narzędzia redystrybucji dochodów gospodarstw domowych
w Polsce w okresie transformacji, Instytut Pracy i Polityki Socjalnej, IPiSS, seria Opracowania PBZ [PBZ KBN Nr 02507].
Surówka, K. (2004), Rola samorządu terytorialnego w finansowaniu opieki zdrowotnej w dobie kryzysu opieki zdrowotnej
w Polsce, Zeszyty Naukowe Ochrony Zdrowia, Zdrowie Publiczne i Zarządzania, t.II, Nr 1/2004, Kraków.
Swianiewicz P., Herbst M., Marchlewski W., (2005), Finansowanie i realizowanie zadań oświatowych na obszarach wiejskich.
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Zahorska M. (ed.). 2003. Opieka przedszkolna w Polsce – szanse i zagrożenia. Instytut Spraw Publicznych, Warszawa.

Impact of Decentralisation
List of tables and figures
Table 1. Current health system costs covered from public sources
Table 2. Results of probit regressions for preschool enrollment, 1998 and 2003
Table 3. Results of probit regressions for preschool enrollment, 1998 + 2003
Table 4. Double-logarithmic regressions of household expenditure on education, 1998 and 2003
Table 5. Double-logarithmic regressions of household expenditure on education, 1998 + 2003
Table 6. Double-logarithmic regressions of household expenditure on a child at kindergarten: 1998, 2003 and 1998+2003
Table 7. Concentration coefficient of imputed primary education transfer, 1998 and 2003
Table 8. Logarithmic regressions of household expenditure on health, 1998 and 2003

Figure 1. Sub national government expenditure as a percentage of GDP

Figure 2. Sources of Gmina revenue
Figure 3. Gmina total revenues per capita, 1996-2004
Figure 4. Gmina expenditure on education, health and social welfare
Figure 5. Primary school ownership 1992-2004
Figure 6. Expenditures on kindergartens and schools 1990-2005
Figure 7. Sub national government health expenditure
Figure 8. Percentage of 3-5-year-olds in kindergartens
Figure 9. Gmina education expenditure per student
Figure 10.Gmina expenditure on school and preschool education.
Figure 11. Household and Gmina expenditure on education
Figure 12. Household and Gmina preschool expenditure per child
Figure 13. Incidence of household expenditure on education by place of residence, 1998 – 2003
Figure 14. Mean household expenditure on education by place of residence, 1998 – 2003
Figure 15. Household expenditure on educational services by education level, 1998 – 2003
Figure 16. Household preschool expenditure per child at kindergarten by place of residence, 1998 – 2003
Figure 17. Household preschool expenditure per child at kindergarten by hh quintile, 1998 – 2003
Figure 18. Relation between Gmina revenue and education expenditure
Figure 19. Relation between Gmina revenue and school expenditure
Figure 20. Relation between Gmina revenue and preschool expenditure
Figure 21. Poverty rate and preschool education
Figure 22. Imputed public transfer on primary education of TU73: quintile shares
Figure 23. Relative imputed transfer on primary education of TU73: all households
Figure 24. Relative imputed transfer on primary education of TU73: rural households
Figure 25. Relative imputed transfer on primary education of TU73: urban households
Figure 26. Household and subnational government health expenditure per capita
Figure 27. Gmina health expenditure per inhabitant 1998-2003
Figure 28. Incidence of household expenditure on health, 1998 - 2003 by place of residence
Figure 29. Incidence of household expenditure on health, 1998 - 2003 by consumption quintile
Figure 30. Household expenditure on health, 1998 - 2003 by place of residence
Figure 31. Household expenditure on health, 1998 - 2003 by type
Figure 32. Household expenditure on health, 1998 - 2003 by consumption quintile
Figure 33. Gmina revenues and health expenditures
Figure 34. Poverty rate and health expenditures