Economic growth, public expenditure on health and IMR in India

Abstract

Purpose The purpose of this paper is to employ a two-step approach to investigate the bi-directional causal linkage between: economic growth (measured by GDP) and public expenditure on health; public expenditure on health and infant mortality rate (IMR); and economic growth and IMR in the Indian context. Design/methodology/approach The present study uses econometric analysis, namely, panel cointegration and Granger causality on 20-year panel data on 16 major Indian states to investigate the causality. Findings The results suggest GDP to Granger cause public expenditure on health both in the short run and in the long run, but public expenditure on health to Granger cause GDP only in the long run. Further, public expenditure on health and economic growth were found to Granger cause IMR in the long run. However, the reverse linkage from IMR to public expenditure on health and/or economic growth was not significant. Research limitations/implications The present study provides support to the existing literature on the effects of economic growth on health expenditure and health outcomes but also raises a question on the time required to realize the same. Practical implications The findings have implications for policy makers on the time frame and application of health expenditure to achieve better results. Originality/value The present study is one of the first to test the tripartite linkage between economic growth, public health expenditure and health outcomes at a state-level analysis.