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Modeling Health in a CGE Framework: A Case Study of India


  • Nitesh Sahay
  • John Cockburn
  • Mitu Pathak


Health is considered to be an extremely important component of human welfare. By the time India gained independence in 1947, achievement of good health had become an important national goal in its own right. Nevertheless, a vast public health infrastructure in India comprising of 145,000 Sub-centres, 23,000 Public Health Centres (PHCs) and 3222 Community Health Centres (CHCs) is estimated to be able to cater to only 20% of the Indian population. There have been numerous attempts to understand and analyze the causes underlying the failures of the health policies and thereby to provide meaningful solutions. While most of the earlier attempts to understand health look at the role of public and private institutions in the provision of health care, the focus of this paper is to identify the role that households play in determining their health status and the macroeconomic effects this decision can generate. The paper uses a CGE framework to simulate the effects of complete tariff liberalization in the presence / partial withdrawal / complete absence of health subsidy. Among major conclusions, this paper finds that complete subsidization of health reduces overall disparity by favoring rural households over urban. Withdrawal of health subsidy leads to domestic re-allocation of poverty pushing down the wage rates in agricultural sector, the main stay of rural households.

Suggested Citation

  • Nitesh Sahay & John Cockburn & Mitu Pathak, 2013. "Modeling Health in a CGE Framework: A Case Study of India," Working Papers MPIA 2013-07, PEP-MPIA.
  • Handle: RePEc:lvl:mpiacr:2013-07

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    Health; CGE; Health capital; Health Models; Public Health; Household Production Function;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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