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More on the effectiveness of public spending on health care and education: a covariance structure model

  • Emanuele Baldacci

    (International Monetary Fund, Washington, DC, USA)

  • Maria Teresa Guin-Siu

    (International Monetary Fund, Washington, DC, USA)

  • Luiz De Mello

    (International Monetary Fund, Washington, DC, USA)

Using data for a sample of developing countries and transition economies, this paper estimates the relationship between government spending on health care and education and selected social indicators. Unlike previous studies, where social indicators are used as proxies for the unobservable health and education status of the population, this paper estimates a latent variable model. The findings suggest that public spending is an important determinant of social outcomes, particularly in the education sector. Overall, the latent variable approach yields better estimates of a social production function than the traditional approach, with higher elasticities of social indicators with respect to income and spending, therefore providing stronger evidence that increases in public spending do have a positive impact on social outcomes. Copyright © 2003 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 15 (2003)
Issue (Month): 6 ()
Pages: 709-725

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Handle: RePEc:wly:jintdv:v:15:y:2003:i:6:p:709-725
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  1. Tulkens, Henry & Vanden Eeckaut, Philippe, 1995. "Non-parametric efficiency, progress and regress measures for panel data: Methodological aspects," European Journal of Operational Research, Elsevier, vol. 80(3), pages 474-499, February.
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  3. Gupta, Sanjeev & Verhoeven, Marijn & Tiongson, Erwin R., 2002. "The effectiveness of government spending on education and health care in developing and transition economies," European Journal of Political Economy, Elsevier, vol. 18(4), pages 717-737, November.
  4. Bidani, Benu & Ravallion, Martin, 1997. "Decomposing social indicators using distributional data," Journal of Econometrics, Elsevier, vol. 77(1), pages 125-139, March.
  5. Simon Appleton & John Hoddinott & John MacKinnon, 1996. "Education and health in sub-Saharan Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(3), pages 307-339.
  6. Flug, Karnit & Spilimbergo, Antonio & Wachtenheim, Erik, 1998. "Investment in education: do economic volatility and credit constraints matter?," Journal of Development Economics, Elsevier, vol. 55(2), pages 465-481, April.
  7. 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.
  8. Marijn Verhoeven & Sanjeev Gupta & Erwin Tiongson, 2001. "Public Spendingon Health Care and Poor," IMF Working Papers 01/127, International Monetary Fund.
  9. William C. Hsiao, 2000. "What Should Macroeconomists Know About Health Care Policy: A Primer," IMF Working Papers 00/136, International Monetary Fund.
  10. Ritha S. Khemani & Sanjeev Gupta & Calvin A. McDonald & Louis Dicks-Mireaux & Marijn Verhoeven, 2000. "Social Issues in IMF-Supported Programs," IMF Occasional Papers 191, International Monetary Fund.
  11. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  12. Filmer, Deon & Hammer, Jeffrey S & Pritchett, Lant H, 2000. "Weak Links in the Chain: A Diagnosis of Health Policy in Poor Countries," World Bank Research Observer, World Bank Group, vol. 15(2), pages 199-224, August.
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