Health Expenditure and Economic Growth in Sub-Saharan Africa: An Empirical Investigation

N.M. Odhiambo ()
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N.M. Odhiambo: University of South Africa

Working Papers from African Economic and Social Research Institute (AESRI)

Abstract: In this study, the causal relationship between health expenditure and economic growth is examined using panel data from sub-Saharan African countries for the period 2008-2017. The study decomposes health expenditure into two components: public health expenditure and private health expenditure. In order to establish whether the causal relationship between health expenditure and economic growth depends on a country’s level of income, the study divides the studied countries into two groups: low-income countries and middle-income countries. In order to address the omission-of-variable bias, which is associated with some of the previous studies, the study incorporates life expectancy as an intermittent variable between health expenditure and economic growth – thereby creating a system of multivariate equations. Using a panel ECM-based Granger-causality model, the study found that when public expenditure is used as a proxy, a distinct unidirectional causality from health expenditure to economic growth is found to prevail in low-income countries, but no causality is found to exist in middle-income countries. However, when private health expenditure is used, a short-run causality from economic growth to health expenditure is found to prevail in middle-income countries, but no causality is found to exist in low-income countries. Policy implications are discussed.

Pages: 23 pages
Date: 2021-01, Revised 2021-01
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https://aeri.co.za/RePEc/afa/afa-wpaper/AESRIWP05.pdf Revised version, 2021 (application/pdf)

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