Public expenditure efficiency on health in Indian states: generalised stochastic frontier approach

This article investigates how efficient public spending towards health at the sub-national level performs in India and what determines the technical efficiency levels. Utilising multiple outputs through the Generalised Stochastic Frontier Approach to analyse the health expenditure efficiency reveals that technical efficiency accounts for 79.8% of interstate disparities in health outputs in India. The results show that Indian states operate at a 75.5% efficiency level on average during the study period of 2008 to 2020. The spillover effect on health efficiency is positive from the education attainment, where the mean year of schooling positively impacts health expenditure efficiency. Institutional factors such as the state's fiscal capacity and fiscal management positively affect the efficiency levels, whereas the outstanding liability of the states negatively impacts the efficiency levels.