Impact of public spending on health and education of children in India: A Panel data simultaneous equation model

The basic objective of the study is to examine the impact of public expenditure on health and education after incorporating the linkages between health status of children and their educational achievements in India. This study has developed a simultaneous equation model among health and education of children, and public expenditure on these sectors. Three stage least squares technique is applied to get consistent and efficient estimates of the system. The results show that bad health status among children, captured by high IMR, is responsible to have lower enrolment rates and high dropout rates in primary level. In addition, public expenditure on Supplementary Nutritional Program has indirect positive impact on education through the improvements in health status of children whereas additional expenditure on elementary education has positive impact on enrolment rates, but at diminishing rate. Moreover, public expenditure on elementary education has greater impact on enrolment as compared to dropout rates.