Public Social Expenditures and Economic Growth: Evidence from Selected High Income States of India

Abstract

The main objective of the study is to empirically evaluate the impact of the public social expenditures (education and health)on economic growth and direction of causality among the variables used at the disaggregate level (top high-incomestates of India) using time series econometric models and data set covering the period 1990–1991 to 2016–2017. The study employed the public social human capital expenditures on education and health to capture the economic growth of the states. The empirical results of the ADF test showed that the time series variables used are all stationary at first order difference at 5 per cent level of significance. The estimated results of the cointegration test showed that there was an absence of co-integration relationship (no long-run relationship) among the variables in the states of Gujarat, Jammu and Kashmir, Maharashtra and Punjab. The results of Wald statistic indicated that neither short run nor long-run causality run from education expenditure and health expenditure to the economic growth of Tamil Nadu and West Bengal. The findings of this study may be helpful for the policy-makers to amend the existing policies and budgetary allocation for the health care and education sectors of the study states.