Public expenditure and healthcare utilization: the case of reproductive health care in India

An important reason for public intervention in health in developing countries is to address the issue of accessibility. However, numerous studies have found inconclusive evidence of the effect of public expenditure on health outcomes. Here, I revisit the debate by examining the effect of public expenditure on the use of health services, which is an important link between expenditure and outcomes. I use data from two recent waves of the National Family Health Survey of India to study the role of public expenditure on the use of healthcare services during pregnancy and childbirth. India has high state-level variations in the use of prenatal care and delivery by skilled personnel as well as levels of public expenditure. I exploit the variation in public expenditure to identify its effect on the use of healthcare services, controlling for other confounding factors. The results show a significant effect of public expenditure at the state level on the use of both prenatal and delivery care at the individual level. Also, there is no evidence of public expenditure crowding out private expenditure. Further, there is strong evidence that public expenditure reaches the desired targets. The results highlight the positive implications of raising public expenditure for healthcare use of pregnancy and childbirth services in the Indian context.