DETERMINANTS OF INDIA’S HEALTH EXPENDITURE: AN ECONOMETRIC ANALYSIS

Abstract

Human capital is the key factor of economic development where government expenditure on health care is the dominant variable by which GDP per capita, human development, emission per capita, education expenditure and other prime factors of health economics depend upon. The paper explores the short run and long run causalities among them through cointegration and vector error correction analysis in India during 1990-2017. The paper also finds out the behavior of India’s health expenditure percent of GDP during 1990-2017 using polynomial regression, structural breaks, H.P. filter and ARIMA models. The paper concludes that the health expenditure of India is polynomial in character during 1990-2017 which have two upward and downward structural breaks. Health expenditure has long run association with HDI, GDP per capita, CO₂ emissions per capita, energy use, life expectancy at birth and education expenditure as per cent of GDP during the same period. Health expenditure has long run causalities from CO₂ emission per capita, energy use, life expectancy at birth and education expenditure in India respectively but has short run causalities from HDI, life expectancy and education expenditure. Even there is short run causality from health expenditure to education expenditure as percent of GDP. Two significant cointegrating equations converge to equilibrium. VECM states that the change of health expenditure percent of GDP was positively associated with previous year change of GDP per capita and life expectancy at birth significantly and negatively related with previous year changes of HDI and education expenditure percent of GDP in India during 1990-2017. The VECM is unstable and non-stationary and suffers from autocorrelation problem. The impulse response functions conclude that the responses of health expenditure percent of GDP to energy use, life expectancy at birth and education expenditure percent of GDP move to equilibrium.