Effect of Socioeconomic Inequality in Health on Economic Wellbeing: Evidence from India

Kumar, Kaushalendra (1); Ram, Faujdar (2); Singh, Ashish (3); Singh, Abhishek (4) (2016). 'Effect of Socioeconomic Inequality in Health on Economic Wellbeing: Evidence from India' Paper presented at the annual conference of the HDCA, Tokyo 2016.

Population health is one of the major determinants of human capital formation and thereby one of the main drivers of economic and social development in a society. However, there is little scholarship on how the distribution of health affects income, economic growth and development in a society, particularly in a developing one. Examination the effect of health inequality on productivity and economic growth is important because there is ample evidence that middle and low-income countries suffer from severe inequalities in risk factors and health among population (McKinnon, et al. 2014) and if higher inequalities in health are negatively correlated with productivity and economic growth, then by targeting inequalities in health, labour productivity and economic growth can be increased. There is no comprehensive study at the national level to understand the interface between health inequality and income as well as economic growth in India. This is despite the fact that India is known for huge and widening geographic as-well-as socioeconomic inequalities in health.
           We construct a cross-state panel data of fifteen major states of India for the period, 1983-2006, and examine the effects of socioeconomic inequality in health on economic wellbeing in India. We measure income by annual per capita net state domestic product (PCNSDP) at factor costs, which is the ratio of annual net state domestic product (NSDP) by midyear state’s population. We have used PCNSDP and income interchangeably in the text. Health inequality is measured by absolute difference between under-five mortality rate among children born to illiterate mothers and children born to mothers who have at least completed primary school. Under-five child mortality rate by mother’s education has been calculated for the period,1983-2006 from the pooled sample of women aged 15-49 years (reproductive age), from the birth history of National Family Health Survey (NFHS) 1 (1992-93), NFHS2 (1998-99) and NFHS3 (2005-06). Income and growth in income depend not only on the distribution of health in a population, but also on its level. The level of health has been measured in terms of adult survival rate (ASR), which is the probability of survival of an individual of age 15 years up to 65 years. ASR has been calculated using cross-sectional age specific death rates (ASDR) obtained from the statistical report of the sample registration system (SRS), published by the Office of the Registrar General of India (ORGI). Physical capital is one of the important factors of production, which the human capital employed uses to produce final goods. We have estimated the net state domestic capital formation by multiplying the India’s net domestic capital formation by the state’s share in national income. Net domestic capital formation is taken from the annual publication, Handbook of Statistics on Indian Economy by the Reserve Bank of India.
            Educational level is measured as percentage of the adult with secondary education and above. Experience of the employed adult is calculated as the current age excluding years of schooling and six years of childhood. Education and experience is adjusted for the share of male and female adults to the total working age population. Labour force is the share of working age population (15-65 years) in total population. Dependency ratio is the ratio of young population (age less than 14 years) and old age population (age 65+ years) to the working age population, 15-65 years. Urbanization is the percentage of population living in urban areas. Ethnic minority is the share of non-Hindu population and socially disadvantaged is the share of Scheduled Caste and Scheduled Tribe population in the total population, respectively. The data for the period, 1983 to 2006 on education, working age population, experience, dependency ratios, urbanization, ethnic minority share, and socially disadvantaged have been obtained (and calculated) from the nationally representative consumption expenditure and employment and unemployment surveys conducted by the National Sample Survey Organization (NSS) of India. Total fertility rate is taken as a proxy for population growth, parental investment in child health and education and female labour force participation, and is compiled from the statistical report of the sample registration system (SRS). The per capita food grains production has been compiled from the annual publication, Handbook of Statistics on Indian Economy by the Reserve Bank of India.
            Growth rate of the independent and dependent variables is the ratio of current value over the three year lagged value. Overall, for examining the effect of health inequality on PCNSDP (India, 1983-2011), we have 360 state-year observations. Effect of the level of health inequality on the level of income has been empirically investigated using level regressions whereas the effect of health inequality on growth of income has been examined using growth regressions. The level regression has been estimated using fixed effect-instrumental variable (IV) general methods of moments (GMM) models. For the estimation of the growth regression both Random effects (using Generalized Least Squares (GLS)) and fixed effect models have been used.
            In the study period, average income growth rate is 1.26 times (26% growth in three years), which means that on an average PCNSDP became 1.26 times of its three year lagged value. Similarly, the average rate of decline in health inequality over every three years period is 0.880 times, which means that on an average health inequality became 0.880 times (12% decline) of its three years lagged value. Results indicate that a 10% decline in health inequality will result in a 1.7% increase in income. From the study sample with Rs.16222 average income and 76 (per thousand live births) points health inequality, we can say that a 7.6 points decline in health inequality result in Rs.276 increased income. Also a 1% increase in probability of survival of the persons aged 15 to 65 years, will lead to a 1.2% increase in income. Moreover, a 10 per cent decline in growth of health inequality will result in a 0.69% increase in the growth rate of income.
McKinnon, B., Harper, S., Kaufman, J. S. and Bergevin, Y. (2014) Socioeconomic inequality in neonatal mortality in countries of low and middle income: A multicountry analysis. 

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