Does Economic Freedom Influence Major Health Indicators in India? Cross-state Panel Estimation Results

Abstract

It is widely acknowledged that inadequacies in public sector health systems can only be overcome by substantial structural and institutional reforms. In India, the need for reforms in the health sector has been highlighted and stressed upon in recent period. While there is a growing belief that public and private sectors in health can potentially gain from one another, there is also recognition that, given their respective strengths and weaknesses, neither the public sector nor the private sector alone can operate in the best interest of the health system. The current study attempts to analyse the impact of enabling environments measured by the economic freedom index in 20 Indian states on select healthcare outcomes, through a panel data model. The empirical results confirm that rise in economic freedom lowers maternal mortality and infant mortality, as the resulting conducive environment enables greater private sector participation. However, the crucial role to be played by the public sector is also underlined in no uncertain terms. The obtained results strongly indicate that the health scenario in India can improve only through closer co-ordination between the public and the private sectors.