Fiscal, Labour Market and Distributive Effects of Educational Reforms: A Hybrid Simulation Study of Free Senior High School Policy in Ghana

This study combines the GHAMOD microsimulation model, which is from the pool of SOUTHMOD models by UNU-WIDER, and IFPRI’s RIAPA dynamic CGE model to investigate the fiscal and economy-wide impacts of educational reforms in Ghana’s Free Senior High School (FSHS) policy. Introduced in 2017/2018, the FSHS policy aims to improve access to secondary education, particularly for the poor. However, like several other subsidy interventions in developing countries, the policy has introduced significant fiscal and implementation challenges as well including overstretched facilities, impaired subsidy payment by the government for feeding, teaching and learning materials. Thus, putting a strain on quality of education. The paper simulates the current universal FSHS policy and six alternative reforms that explore efficiency, fiscal sustainability, and social equity. Specifically, we evaluate policy effectiveness and distributive effects of the status quo ‘universal FSHS grant’ with targeted scenarios with respect to (1) a beneficiary’s boarding/residency status (2) poverty status of beneficiary students (means-tested), and (3) capped benefit for all beneficiaries. These scenarios are evaluated on long term impacts on government savings, poverty, inequality, sectoral growth, and labour market outcomes up to 2040. Our findings indicate that targeted reforms do not only lead to increased fiscal savings, which when reinvested offsets non-market incomes of households from the limited grant transfer by stimulating sectorial growth, employment and positive distributive impact on households. We are able to demonstrate that simpler and less-costly non-means-tested schemes based on residency or capped benefits could be deployed to mitigate the fiscal constraints posed by the current form of the policy while yielding significant positive fiscal and distributive impacts. The findings from the study contribute to deepening the FSHS policy discourse in Ghana. Specifically, the simulated reforms could guide the pursuit toward a targeted FSHS policy which is fair and fiscally sustainable.