Health Expenditure and GDP Growth in Botswana

Abstract

Botswana has always been recognised as an economically stable and upper middle income country in Sub-Sahara Africa, very often celebrated as a model economy for its prudential fiscal management. In 2009 Botswana become one of the few countries which have met the Abuja targets in per capita health expenditure. Amidst a high literacy rate and reasonably high economic growth, health expenditure being the highest among the SADC countries, Botswana has the HIV/AIDS prevalence which is one of the highest in the African continent. A stable relationship between health expenditure growth and income growth is crucial for health policy formulation. Four issues associated with health expenditure in the estimation of income elasticity which have not been adequately addressed in earlier studies are role of technology, heterogeneity of the health expenditure, treatment of structural break and dynamic aspects of health expenditure. This paper attempts to address these issues while estimating the income elasticity of health expenditure for Botswana considering both macro-data for 1981-2016, and micro-data drawn from the Household Income Expenditures Surveys, 1993/94 and 2003/04 according to residence status. Our results for Botswana indicate that the health care is a necessity at least in the short run. This is in contrast to the available evidence for other countries especially among upper middle income and in Africa.

Government expenditure on health and economic growth in Botswana

“…The positive effect of expenditure on health works through improved worker productivity since a health population adapts quickly, works longer and more efficiently (Aghion & Howitt, 1996, Gaies, 2022. This is supported by past studies (Liang, 2012, Lee et al, 2019, Erçelik, 2018, Raghupathi & Raghupathi, 2020, Sinha, 2021, Abdulqadir et al, 2022, Gaies, 2022 which show that an increase in health care expenditure accompanies economic growth. This is realised as better health care stabilizes life and contributes to improved worker productivity.…”

“…Before 2001, public health spending accounted for just over half of total health expenditures (THE) which hovers just above 4 percent of GDP (Lule and Haacker, 2012). Sinha (2021) shows that THE is on a steep rise since 2001 being underpinned by a similar trend in RHE. DHE makes a gradual increase until 2009 before receding to 2002 levels until the end of 2013.…”

“…Studies have applied different methods to test the bidirectional linkages between these variables. For example, positive association and relationships have been tested using constraint method, autoregression lag approach, and other methods employing panel data to help understand the dynamics involved (Murthy & Okunade, 2016, Atilgan et al, 2017, Sinha, 2021. Moreover the conclusions from panel data are unrealiable due to omitted variables bias and the presence of unobserved country and year specific determinants of per capita health expenditures.…”