Convergence analysis of health expenditure in Indian states: Do political factors matter?

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 non-convergent. 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.