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# **Efficiency:**

_Greater Inefficiency:_ In addition to equity problems, China is getting less incremental health improvement as a return on its expenditures than in the mid-1980s, thus creating efficiency problems. Once again, Table 2 shows how the maximum outcomes--percentage reductions in infant and maternal mortality rates--have been achieved with minimum percentage increments in public health expenditure. It is clear that the greater the percentage increase in public health spending the smaller the reduction in mortality rates in the poorest provinces (quintile I) than in the wealthiest provinces (quintile V) between 1982 and 1993. Figure 6 shows that most of the wealthy provinces are significant (negative) outliers, having lower infant mortality rates predicted for its government health spending. When regression is done with provincial data, the impact of government health spending on reducing mortality rates in 1982 was greater in poorer provinces than in richer provinces. Conversely, in 1993, a somewhat reduced effect of government health spending on health status was found in poorer provinces than in wealthy provinces (Technical Annex A).

_Relative Effects of Public Policies on Health Status._ Before eliciting future strategies in the final section, it would be useful to assess the effects of several public health interventions on the overall health status of Chinese population. For more than three decades, China has made remarkable stride in improving the health status of its population. Given the extent of this progress, it is, important to examine whether the improvement in health outcomes can be linked to specific components of public policy or, as is also possible, whether the achievement is due mainly to gains in overall income overtime. Thus, this section posits to what extent can particular government policies such as public expenditure on health, access to various public health services improve the health status of the population?

Regressions are used to assess the impacts of changing government policies and income levels on infant mortality rates and life expectancy at birth. The data used are a time-series of 198393 from cross-section of 29 provinces in China. To isolate the relative effects of each determinant of health improvement, three different econometric procedures are used, and Table 5 presents the results'.The empirical results indicate the importance of income, public health expenditures, sanitation and DPT3. Income is consistently the most important variable in reducing mortality. The OLS estimates show that provinces with coverage of safewater and sanitation facilities have had low infant mortality rates. The positive coefficient on public health expenditures reflects that more money is being spent in those provinces where infant mortality rates are high. The impact of such expenditures is manifested in the fixed and random effect columns. Indeed, the results show that overtime, greater allocation of government resources did have a favorable impact in reducing infant deaths, suggesting that higher expenditure, generally synonymous with expanded supply of drugs, consumables, and equipment, can be effective in improving health status.

I To disentangle the relative impacts of income growth and public policy variables (expenditures, sanitation, safewater, DPT3) on infant mortality rates and gains in life expectancy at birth, three methods are used, simple OLS without provincial dummies; a fixed effect model with provincial dummies, and random effect with generalized least squares (GLS).