Rudi Rocha (Sao Paulo School of Business Administration, Fundação Getulio Vargas)

Does Increasing Public Spending in Health Improve Health? Lessons from a Constitutional Reform in Brazil

Abstract: This paper makes two contributions in understanding how government health spending shapes health outcomes by exploiting unique top-down variation generated by Brazil’s 29th Constitutional Amendment, which mandated minimum thresholds for municipal health spending. Firstly, we track downstream effects from increases in spending, documenting increases in available resources and access to health, with resulting declines in infant mortality. Secondly, we uncover non-linearities and input complementarities in production functions of public healthcare, mapping margins of spending effectiveness and constraints, including institutional factors. In particular, we find that effects are eroded in high corruption areas but substantially enhanced where strong management capabilities exist.