Health expenditure and economic growth in Sub-Saharan Africa: An empirical investigation
Nicholas Odhiambo ()
No 27167, Working Papers from University of South Africa, Department of Economics
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.
Keywords: Health Expenditure; Economic Growth; Sub-Saharan Africa; Panel Granger Causality (search for similar items in EconPapers)
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