DP3227 Explaining Leakage of Public Funds

Author(s): Ritva Reinikka, Jakob Svensson
Publication Date: February 2002
Keyword(s): corruption, leakage, public expenditure tracking survey, school funding
JEL(s): D73, H52, I22
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3227

Using panel data from an unique survey of public primary schools in Uganda we assess the degree of leakage of public funds in education. The survey data reveal that on average, during the period 1991-95, schools received only 13% of what the central government contributed to the schools? non-wage expenditures. The bulk of the allocated spending was either used by public officials for purposes unrelated to education or captured for private gain (leakage). Moreover, we find that resource flows and leakages are endogenous to schools socio-political endowment. Rather than being passive recipients of flows from government, schools use their bargaining power vis-a-vis other parts of government to secure greater shares of funding. These results have clear implications for research. The survey findings also had a direct impact on policy.