The IQuaL model: from public expenditure to services

Luciano Canova (Catholic University, Piacenza)Enzo Di Giulio (Eni Corporate University)

Stefania Migliavacca (Eni Corporate University) Stefano Pareglio (Catholic University, Brescia)

Alessandro Vaglio (University of Bergamo)

IQuaL: a dynamic model for assessing quality of life and evaluating the impact of public policies Pavia, 12 July 2007

Agenda

• The idea of operationalization

• IQuaL: general features and basic

structure

• Education, Health and Environment

• Conclusions

Steps toward the operazionalization of the capability approach

2003, Grasso-Di Giulio:“Mapping sustainable development in a capability perspective”

2004, Crasl Research“The MISS Model: MeasurIng Sustainability in Sen’s framework”

2006, FLA-IUSS Research“The IQuaL Model: Individual Quality of Life”

IQuaL

The model aims to represent the process through which the individual well-being is generated, starting by a given level of public expenditure.

• Government

• 3 generations (young, mature and old)

• gender

• 3 functionings

Three stages

1. The total public budget is allocated to

services

2. The sectoral budget is allocated to basic

components which are transformed into

services through the production function

3. The conversion factors translate services

into functionings

Basic structureEducation

Health

Environment

K1

K2

K3

K4

J1

J2

J3

X1

X2

X3

EDUCATIONSERVICES

HEALTHSERVICES

SERVICES

CONVERSION

FACTORS

Present

CONVERSION

FACTORS

Present -Past

CONVERSION

Present -Past Past

YOUNGMALE

POPULATION

YOUNGFEMALE

POPULATION

GROWN-UPMALE

POPULATION

GROWN-UPFEMALE

POPULATION

OLDMALE

POPULATION

OLDFEMALE

POPULATION

EXCEL EXCEL EXCEL EXCEL EXCEL EXCEL EXCEL Ithink ithink ithink ithink ithink ithink ithink ithink ithink

PUBLIC

EXPENDITURE

FACTORS

LeontievFunction

LeontievFunction

LeontievFunction

ENVIRONMENTAL

EDUCATIONFUNCTIONING

HEALTHFUNCTIONING

“LIVING IN A SAFE ENVIRONMENT”FUNCTIONING

Ithink

General features

• Inter- and intra-generational effects of public expenditure choices

• No explicit public choice,but comparison of alternative paths of public expenditure

• Exogenous public budget constraint (no endogenous resource formation)

The budgeting stage

• Starting from a given budget I the Government chooses a vector of basic components k such that pk≤I, where p is a vector of given input prices

• Since the budget constraint is intertemporal, this means that the model considers the problem of inter-generational allocation

• The model contains a discount rate, usually equal to 1%

The production stageIn choosing k the Government tends to maximize the output of the service according to a Leontiev-type production function T:

IpktskTk

..][max

The Leontiev type function has three advantages:– It is consistent with the practice of describing services using

per-capita indicators

– It gives a simple but useful message: the most relevant input is the scarcest one

– The output can be measured as the maximum number of persons to whom the “ideal” service is provided

s

skkk

,....,,min

2

2

1

1kT

The conversion stage

Finally the individual converts the service into a functioning according to his/her conversion rate t

][ktTS

Two important features:

MEMORY: functionings depend on the services which are currently available and also on those which have been available in the past

INTERDEPENDENCE: the health functioning depends on the health service and also on the level of past education service and current environmental conditions

Education

• Measuring the quality of education (PISA Scores)

• Inputs to Education production

• National models of education production (Finland

vs Italy)

• Towards an efficient frontier for the production of

education

• The Best Practice

Health

• Measuring the quality of health

• Inputs to Health production

• Identifying the best practice (Japan)

• Conversion stage: role of education and

environment

Environment

• Measuring the (perceived) quality of environment

• Inputs to Environmental service (differentiated

waste; availability of public transport; availability

of green areas)

• Identifying the best practice within Italy

Basic components

Education Service Health Service Environmental Service

Public expenditure for teachers’ salaries

Medical staff (number of doctors)

Differentiated waste

Current public expenditure other than teachers’ salaries

Para-medical staff (number of nurses)

Sustainable mobility (public transport network available)

Capital account public expenditure on education

Hospital facilities (acute care beds)

Available green areas

Available technology (Magnetic Resonance Imaging Units)

Conclusions

• Focus on the relationship between public

expenditure and functionings

• Population heterogeneity

• Possible extensions:

– endogenizing public expenditure;

– increasing the number of overlapping

generations