Abstract
BackgroundThe district resource allocation formula in Malawi was recently reviewed to include stunting as a proxy measure of socioeconomic status. In many countries where the concept of need has been incorporated in resource allocation, composite indicators of socioeconomic status have been used. In the Malawi case, it is important to ascertain whether there are differences between using single variable or composite indicators of socioeconomic status in allocations made to districts, holding all other factors in the resource allocation formula constant.MethodsPrincipal components analysis was used to calculate asset indices for all districts from variables that capture living standards using data from the Malawi Multiple Indicator Cluster Survey 2006. These were normalized and used to weight district populations. District proportions of national population weighted by both the simple and composite indicators were then calculated for all districts and compared. District allocations were also calculated using the two approaches and compared.ResultsThe two types of indicators are highly correlated, with a spearman rank correlation coefficient of 0.97 at the 1% level of significance. For 21 out of the 26 districts included in the study, proportions of national population weighted by the simple indicator are higher by an average of 0.6 percentage points. For the remaining 5 districts, district proportions of national population weighted by the composite indicator are higher by an average of 2 percentage points. Though the average percentage point differences are low and the actual allocations using both approaches highly correlated (ρ of 0.96), differences in actual allocations exceed 10% for 8 districts and have an average of 4.2% for the remaining 17. For 21 districts allocations based on the single variable indicator are higher.ConclusionsVariations in district allocations made using either the simple or composite indicators of socioeconomic status are not statistically different to recommend one over the other. However, the single variable indicator is favourable for its ease of computation.
Highlights
The district resource allocation formula in Malawi was recently reviewed to include stunting as a proxy measure of socioeconomic status
This paper examines, using the Malawi district resource allocation formula, whether there are differences between weighting population with simple and composite indicators of socioeconomic status in terms of allocations made to districts, holding all other factors in the formula constant
Variables which have positive factor scores are associated with high socioeconomic status whilst the converse is true for those with negative values
Summary
The district resource allocation formula in Malawi was recently reviewed to include stunting as a proxy measure of socioeconomic status. In many countries where the concept of need has been incorporated in resource allocation, composite indicators of socioeconomic status have been used. In the Malawi case, it is important to ascertain whether there are differences between using single variable or composite indicators of socioeconomic status in allocations made to districts, holding all other factors in the resource allocation formula constant. The four commonly used methods are: i) political patronage ii) historical allocations iii) bids by local governments and iv) needs-based resource allocation formulae [1]. Formula funding has become a preferred method of allocating resources in many publicly financed health systems. Formula funding presents a widely accepted mechanism for setting budgets for devolved organizations [1]
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