Efficiency of Social Sector Expenditure in India: a Case of Health And
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Healthcare in Low-resource Settings 2014; volume 2:1866 Efficiency of social sector varied between 36.8 (in 1990-1995) to 39.2% (2010-2011).1 Within social sector, major Correspondence: Brijesh C. Purohit, Madras expenditure in India: chunk (nearly 57%) is being spent on educa- School of Economics, Gandhi Mandapam Road, a case of health and education tion, sports, art and culture (46.1%) and med- Kottur, Chennai-600025, India. in selected Indian states ical and public health (10.5%). The other items Tel. +91.044.2230.0304 - Fax: +91.044.2235.4847. which include: family welfare and water supply E-mail: [email protected] Brijesh C. Purohit and sanitation, housing, urban development, Key words: social sector expenditure, India, welfare of scheduled castes, scheduled tribes health, education. Madras School of Economics, Kottur, and other backward castes, labour and labour India welfare, social security and welfare, nutrition, Acknowledgments: an earlier version of this natural calamities and the rest, comprise a low paper was presented at National Conference on percentage which varies from 1.3% (natural Social Sector in India: Issues and Challenges, calamities) to 9.6% (social security and wel- March 29-30, 2013, Golden Jubilee Celebrations 2012-13, Centre of Advanced Studies, Department fare) of total social sector. It becomes pertinent Abstract of Analytical and Applied Economics, Utkal therefore to analyse whether the major expen- University, Odisha, India. Thanks are due to par- Social sector expenditure in India captures diture sectors like health and education are ticipants of this conference for their valuable a number of important aspects including performing satisfying the criteria of efficiency. comments. health, nutrition, education, water supply, san- Several approaches for measuring the efficien- itation, housing and welfare, among others. cy of government expenditure have been pro- Received for publication: 7 August 2013. Over a period of time, besides budgetary outlay posed in the literature.2 In general, these Revision received: 2 October 2013. Accepted for publication: 3 November 2013. on this sector, private sector has also played a approaches are broadly of four types. First, considerable role. Thus, efficiency of expendi- studies which have concentrated on gauging This work is licensed under a Creative Commons ture in this sector by state government has to and enhancing efficiency by focusing on cer- Attribution 3.0 License (by-nc 3.0). be reckoned both in terms of relative levels of tain types of government spending in a specif- various aspects across the states and in terms ic country. Secondly, those only which use data ©Copyright Brijesh C. Purohit 2014 of comparable benchmarks for different on inputs of government spending in quantita- Licenseeonly PAGEPress, Italy aspects of the sector. This paper attempts an tive terms, but not on outputs. Third, those Healthcare in Low-resource Settings 2014; 2:1866 doi:10.4081/hls.2014.1866 analysis of social sector efficiency focusing on using only outputs, but not inputs. Finally, two major aspects: health and education. those which have looked at both inputs and Unlike other studies on the Indian context, outputs; these studies, however, haveuse not this analysis focusing on major states in India made a consistent comparison of the efficien- duction functions in developing countries and uses both non-parametric and parametric cy of government spending among countries.3- investigate the relation between education approaches. Although both approaches provide 6 These studies do not explicitly analyze the inputs and outputs. Another type of analysis, benchmarks to judge relative efficiency across relationship between government spending for instance by Tanzi and Schuknecht14 assess- states, the former provides a yardstick more at and social indicators. Within each of the es the incremental impact of public spending an aggregative level without parametric approaches, however, one may distinguish the on social and economic indicators in industri- restrictions, whereas the latter is used for studies which have focussed only on developed al countries and conclude that higher public major focus on health care aspects. Results of country (or countries) or only on developing spending does not significantly improve social free disposal hull analysis are suggestive of a country (or countries) and further in terms of welfare. In most studies of developing coun- considerably more scope for improvement in their interest in education and health sector tries, it is found that teacher education, efficiency of public expenditure in health rela- also. Thus, the issue of gauging and enhanc- teacher experience, and the availability of tive to education. Our results of stochastic ing government efficiency continues to inter- facilities have a positive and significant frontier analysis indicate considerable state est policymakers and researchers alike.2,7-9 impact on education output, and that the effect level disparities which could be reduced This interest received a boost with the initia- of expenditure per pupil is significant in half through a mix of strategies involving realloca- tion of wide-ranging institutional reforms by the studies; the pupil-teacher ratio and teacher tion of factors (namely, manpower and supply some of the developed nations10-12 which aimed salary have no discernible impact on education of consumables) within the sector, mobilizingNon-commercialat improving the efficiency of the public sector. output. Likewise, Jimenez and Lockheed15 also additional resources possibly through These reforms basically were to separate poli- assess the relative efficiency of public and pri- enhanced budgetary emphasis, or encouraging cy formulation from policy implementation, vate educations in several developing coun- more private sector participation. Based on our create competition between government agen- tries by taking into account both inputs and results, this may enhance efficiency by nearly cies and between government agencies and outputs. In regard to health care sector, for 20% in health care sector and increase avail- private firms, and develop output-oriented instance, among developed nations, using ability and equity across low performing and budgets using a wide array of output indica- regression analysis and focusing on inputs, a poorer states like Madhya Pradesh and Uttar tors. This practice of result-oriented public study of OECD member countries covering 20 Pradesh. expenditure management has generated a years analyzed the efficiency of health care wealth of information on how to control pro- systems. They show that public-reimburse- duction processes within the government and ment health systems, which combine private how to enhance their efficiency. provision with public financing, are associated Introduction Pertaining to education sector, for instance, with lower public health expenditures and there are certain studies which analyse both higher efficiency than publicly managed and Social sector comprises an important item inputs and outputs. For instance, Harbison and financed health care systems.16 This is traced in the state budgetary expenditure. It has Hanushek13 provide an overview of 187 studies by looking at factors associated with a high rel- remained around 5.8% of gross domestic prod- of education production functions in the atively expensive in-patient care and the lack uct and its share in total state expenditure has United States and 96 studies of education pro- of a mechanism to restrain demand for special- [page 26] [Healthcare in Low-resource Settings 2014; 2:1866] Article ized health care. Countries without ceilings on nature of application in healthcare sector, an ernments are faring in comparison with these in-patient care were also found to have higher exhaustive review of studies applying these best practices.61-63 In our analysis using FDH, public health expenditure. A number of studies methods has been attempted which provides the term producer is meant to include govern- have laid emphasis on the overall health sys- us in detail the steps and empirical problems ments. A producer is relatively inefficient if tem performance and its impact on health out- that have been highlighted by researchers.38,60 another producer uses less input to generate comes.17,18 More often an idealized yardstick is Notably there are very few studies in the devel- as much or more output. A producer is relative- developed which is used to evaluate economic oping countries’ context and except a few par- ly efficient if there is no other producer that performance of health system. There are a ticularly in the Indian context, which have uses less input to generate as much or more number of studies in health care sector which focused on this aspect; the literature is nearly output. In the Appendix and Appendix Figures employ either non-parametric approaches like marked by absence for recent period. Our study A and B, this is illustrated for the case of one free disposable hull (FDH) or data envelop- thus covers this gap for India for the latest input and one output. If a producer is engaged ment analysis (DEA) or parametric approaches period. in the production of multiple outputs using like stochastic frontier analysis (SFA). more than one input, it becomes more difficult In the former category with a focus on devel- Hypothesis and objective to establish relative efficiency. In such a situa- oped world one may include, for instance, We hypothesize that