Document Type

Working Paper

Abstract

Human capital theory posits that investments in health and education are complementary. Health investments boost education demand, thereby increasing educational expenditures. Drawing on this theory, this paper examines the impact of health coverage on three aspects of household educational investments: (a) the share of educational expenditures, (b) the level of educational spending, and (c) the probability of taking an educational loan. Using a health insurance scheme in India, this study employs a modified difference-in-difference strategy and two waves of the Indian Human Development Survey (2004-05 and 2011-12). The findings show that health insurance led to a 10 percent rise in the share of educational expenses, a 39 percent increase in per person educational spending, and a 185 percent rise in the likelihood of taking education loans. These effects are stronger for households below the poverty line. At the aggregate level, this externality translates to an additional one-tenth to one-fourth of every unit spent on the health coverage budget. All results are robust to changes in subsamples.

Publication Date

1-2-2025

Publisher

Indian Institute of Management Bangalore

Relation

IIMB Working Paper-714

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