, Volume 46, Issue 4, pp 341-362

What determines public health expenditures in Pakistan? Role of income, urbanization and unemployment

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Abstract

What determines public health care expenditures at the national level is an important policy question. Since the pioneering work of Newhouse (J Hum Resour 12(1):115–125, 1977) on the relationship between health expenditures and national income, this area of economic inquiry has received much attention. This paper seeks an answer to this question by estimating the factors affecting public health expenditures at the national level in Pakistan. This paper uses annual time series data from 1972 to 2009 and employing unit root and Johansen cointegration methods estimated the determinants of public health expenditures. It is estimated that all variables are integrated of order one and are cointegrated hence in a long run relationship. The income elasticity of public health care expenditures is estimated below unity (at 0.26) indicating health care is a necessity in Pakistan contrary to most of the industrialized countries. Furthermore, it is imperative that government have a larger role in allocating and directing public resources to health care in Pakistan. Urbanization and unemployment variables have elasticity values of −1.33 and −0.37 respectively, implying that it is costly to provide health care to residents of remote rural areas of Pakistan.

This paper also accepted as Centre for Development Research (ZEF) Discussion paper on development policy No. 158 in December 2011. This is a modified version of this discussion paper.