An autonomous research institute under the Ministry of Finance


Income elasticity of demand for health care and it’s change over time: Across the income groups and levels of health expenditure in India

Publication date

Oct, 2020


NIPFP Working Paper No. 324


Jay Dev Dubey


This study computes income elasticity of out-of-pocket healthcare expenditures of Indian households both across the income groups using the Spline regression model and across the level of health expenditure based on the Quintile regression technique using survey data collected in 2014 and 2018. Healthcare is found to be a necessary good in all cases, with significant decline in its income elasticity over time. The changes from 2014 to 2018 makes income elasticity higher for lowest income group compared to other income groups for all forms of health expenditure in rural areas and for outpatient and non-medical expenditure in urban areas. The overall trend for total health expenditure and outpatient expenditure implies that in times of severe health crisis needing expensive treatments, any income increase would lead to higher increase in health expenditure compared to minor health care needs, leading catastrophic health expenditure and impoverishment in case of poor households.
Keywords: Healthcare expenditure, Income Elasticity Spline Estimation, Catastrophe, Quintile Regression
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