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Marginal benefit incidence of public health spending: Evidence from Indonesian sub-national data

  • Kruse, Ioana
  • Pradhan, Menno
  • Sparrow, Robert

We examine the marginal effects of decentralized public health spending by incorporating estimates of behavioural responses to changes in health spending in benefit incidence analysis. The analysis is based on a panel dataset of 207 Indonesian districts over the period from 2001 to 2004. We show that district public health spending is largely driven by central government transfers, with an elasticity of around 0.9. We find a positive effect of public health spending on utilization of outpatient care in the public sector for the poorest two quartiles. We find no evidence that public expenditures crowd out utilization of private services or household health spending. Our analysis suggests that increased public health spending improves targeting to the poor, as behavioural changes in public health care utilization are pro-poor. Nonetheless, most of the benefits of the additional spending accrued to existing users of services, as initial utilization shares outweigh the behavioural responses.

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Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 31 (2012)
Issue (Month): 1 ()
Pages: 147-157

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Handle: RePEc:eee:jhecon:v:31:y:2012:i:1:p:147-157
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  1. Sonia Bhalotra, 2007. "Spending to Save? State Health Expenditure and Infant Mortality in India," The Centre for Market and Public Organisation 07/169, Department of Economics, University of Bristol, UK.
  2. Santiago Lago-Peñas (a), . "Local Governments' Asymmetric Reactions To Grants: Looking For The Reasons (*)," Working Papers 22-04 Classification-JEL , Instituto de Estudios Fiscales.
  3. Hofman, Bert & Kadjatmiko & Kaiser, Kai & Suharnoko Sjahrir, Bambang, 2006. "Evaluating fiscal equalization in Indonesia," Policy Research Working Paper Series 3911, The World Bank.
  4. McGuire, James W., 2006. "Basic health care provision and under-5 mortality: A Cross-National study of developing Countries," World Development, Elsevier, vol. 34(3), pages 405-425, March.
  5. Filmer, Deon & Pritchett, Lant, 1999. "The impact of public spending on health: does money matter?," Social Science & Medicine, Elsevier, vol. 49(10), pages 1309-1323, November.
  6. Sanjeev Gupta & Marijn Verhoeven & Erwin R. Tiongson, 2003. "Public spending on health care and the poor," Health Economics, John Wiley & Sons, Ltd., vol. 12(8), pages 685-696.
  7. van de Walle, Dominique, 1998. "Assessing the welfare impacts of public spending," World Development, Elsevier, vol. 26(3), pages 365-379, March.
  8. Bossert, Thomas, 1998. "Analyzing the decentralization of health systems in developing countries: decision space, innovation and performance," Social Science & Medicine, Elsevier, vol. 47(10), pages 1513-1527, November.
  9. F. Javier Arze del Granado & Jorge Martinez-Vazquez & Robert McNab, 2005. "Fiscal Decentralization and The Functional Composition of Public Expenditures," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0501, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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