There is great divergence in provincial government health expenditures in China. Real per capita provincial government health expenditures (GHE) over the period 2002-2006 are examined using panel regression analysis. Key determinants of real per capita provincial GHE are real provincial per capita general budget revenue, real provincial per capita transfers from the central government, the proportion of provincial population under age 15, urban employee basic health insurance coverage, and proportion of urban population. Roughly equal and relatively low elasticities of budget revenue and transfers imply that the GHE is a necessity rather than a luxury good, and transfers have yet to become efficient instruments for the fair allocation of health resources by policy makers. Moreover, severe acute respiratory syndrome outbreak has increased the GHE, but we find no statistical evidence that provincial GHE have fluctuated according to the public health status.
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