Do Education and Health Spending Impact Development Outcomes? Evidence from Indian States

Paike, Chandralekha (2026): Do Education and Health Spending Impact Development Outcomes? Evidence from Indian States.

Abstract

Motivation:

Investing in education and health care accelerates the human capital accumulation which may improve overall well-being of nations. Though these benefits of investing in education and healthcare are widely known, empirical evidence regarding the relationship between spending and development outcomes is often questionable.

Purpose: 1.Do education and health spending lead to improvement of the development outcomes? 2.How differently does this spending influence the development outcomes among high and low focused states? 3.How differently do political competition and timing of elections influence the relationship between education and health spending and development indicators among high and low focused states?

Approach and Methods: We employ a fixed effects Panel regression for the 28 Indian states from 2005-15. The states are classified into 10 high focused and 18 low focused states. To account for heteroscadasticity, autocorrelation and cross-sectional dependence, we employ fixed effects with Driscoll-Kraay standard errors.

Findings: Higher spending on elementary education leads to improved Net Enrolment Ratio among high focused states. In comparison, among low focused states, increased spending on elementary education may not lead to improvement in Net Enrolment Ratio. Considering the political factors, with an additional political party in power, the interaction effect of education spending and political competition variable on Net Enrolment Ratio weakened among high focused states. Health spending does not impact the Infant Mortality Rate significantly in both categories of states. Policy Implications: Reducing Pupil-teacher ratio and carrying out frequent evaluation of the infrastructural amenities may bring about improvement in the quality of health and education that is provided.

JEL Classification: H51; H52; I15; I25

• Item Type: MPRA Paper
• Language: English
• Keywords: Education and Health spending; Net Enrolment Ratio; Infant Mortality Rate; India
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies

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