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Theoretical and Applied Economics
No. 2 / 2017 (611), Summer

Impact of GDP and tax revenue on health care financing: An empirical investigation from Indian states

Deepak Kumar BEHERA
Indian Institute of Technology Madras, India
Umakant DASH
Indian Institute of Technology Madras, India

Abstract. This paper investigates the long run impact of GDP and tax revenue on public health care expenditure using panel FMOLS and DOLS models for sixteen major states of India over the period 1980-2013. This study is more relevant in order to measure the progress in universal health care financing across the states of India because states are heterogeneous in terms of health care spending, associated with low tax bases and low level of GDP growth. The empirical result shows that health expenditure, GDP and tax revenue are cointegrated in the long run. There is a positive and significant impact of income and revenue generation on growth of health care expenditure while the elasticity of health care expenditure is less than one. The result implies that there is state level heterogeneity in the share of medical and public health care expenditure to income in India. These research findings would serve as effective policy instruments to measure the progress towards universal health coverage among the states of India.

Keywords: public health care expenditure; Indian states; GDP; tax revenue.

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