Convergence analysis of health expenditure in Indian states: Do political factors matter?
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Convergence analysis of health expenditure in Indian states: Do political factors matter? Kumari Youkta
. Rajendra Narayan Paramanik
Accepted: 8 October 2020 Springer Nature B.V. 2020
Abstract Economic theory argues that most often the extent and pattern of expenditure by government is politically driven. In India, in spite of poor health indicators, public spending on health is inadequate which encourages to study the impact of political factors on the nexus between per-capita GDP and public health expenditure for Indian states during 1980–2016. States are categorized into two converging groups which have been identified on the basis of Phillips and Sul convergence analysis. Bihar was the only state among the 20 states, which was nonconvergent. Each convergent group is further analysed with panel corrected standard error model since traditional fixed or random effect models were found to have cross interdependence of errors. Political factors like centre–state political affiliation, party continuation and political unanimity are taken as explanatory variables for this analysis. Empirical findings suggest that political factors play major role in determining health expenditure in each category group but strength of impact differs across two groups.
K. Youkta (&) R. N. Paramanik Department of Humanities and Social Sciences, Indian Institute of Technology, Patna, Bihta, Bihar, India e-mail: [email protected] R. N. Paramanik e-mail: [email protected]
Keywords Political factors PCSE model Health expenditure Phillips–Sul convergence analysis Ruling party
Introduction Health and education are the two key factors for sustainable development of any state. But these two are prone to market failure, which in turn affects the marginalized section and further pushes them into lower stratum in the society. To break this vicious chain role of government becomes important. The efficiency of allocation from its side decides the future of nation and its people. Public expenditure can be an effective tool to tackle market failure (Keefer and Khemani 2005). Literature also suggests that public finance plays an instrumental role for achieving the goal of Universal health coverage (Rottingen et al. 2014; Reeves et al. 2015). Initiatives like Millennium Development Goals and Universal Health Coverage will give positive outcomes when government will also co-ordinate by increasing public spending on health and thus reducing the financial burden on population. Many developed nations like United States (17.1%) Germany (11.5%), Japan (10.9%) etc. spend a substantial portion of their gross domestic product for public health (WHO Global Health Expenditure
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Database 2017). This concern for health gets reflected from the health indicators of these countries. But in developing and least developed countries, despite having poor health outcomes public health expenditure is very low. India is also one of them. By spending 3.5% of its current GDP it’s spending on
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