Does Spending on Human Capital Reduce Fertility and Poverty in India? A Panel Data Study

Gargi  Bhattacharya,; Sushil  K. Haldar,

Does Spending on Human Capital Reduce Fertility and Poverty in India? A Panel Data Study

Abstract:

Using panel data from 16 major states in India over 1972-73 to 2009-10, this paper examines the effect of human capital investment along with key socio-economic variables on fertility and poverty. The dynamic panel results confirm that the current poverty and fertility situation is well explained by the past periods poverty and fertility respectively. There exists a strong and significant impact of human capital investment on reduction of fertility and poverty; the joint dependence between poverty and fertility is empirically verified in our paper. Our findings do not support the inclusivity in respect of social development parameters except female literacy rate. It is observed that the inequality of human capital investment, healthcare and education spending across the major states over time is increasing. Unequal distribution and inadequate social sector spending generates differential decline of fertility and poverty in Indian states. Our development policy should be designed in such a way that can address the two vital issues (poverty and fertility) simultaneously for getting a desirable development outcome. This is because of endogeneity between poverty and fertility. This finding is expected to have some policy relevance in the context of future demographic dividend, inclusive growth, poverty reduction, and fertility regulation.