The Impact of Health Expenditure on the Economic Growth in Sub-Saharan Africa

Abstract

This paper examined the nexus between health care expenditure and economic growth in Sub-Saharan Africa over the period 1995-2014. We use the system General Method of Moments (GMM) technique to estimate the results. The findings reveal the existence of a positive and a statistically significant relationship between the two variables, precisely; health expenditure has a significant impact on the economic growth of the region. Regarding the control variables, while the effect of official development assistance on economic growth is insignificant, foreign direct investment, the active population and gross domestic savings appear as key determinants of economic growth in the region. Additionally, the results show that health care is a necessity rather than a luxury in Sub-Saharan Africa. It is therefore necessary to develop effective and efficient health care programs, increase health expenditure, make an effective use of the young population and create better environment for foreign direct investment in order to foster economic growth in Sub-Saharan Africa.

Healthcare Expenditure and Economic Performance: Insights From the United States Data

“…In addition to this, we draw from several related studies in laying a strong foundation for our research. The relationship between health and economic growth has been examined extensively across multiple studies (11)(12)(13)(14)(15)(16). Based on a study that examined the impact of health on economic growth in developing countries, it was evident that a decrease in birth rates positively affected economic growth (17).…”

“…People generally give high priority and value to a long and healthy life (2,25). Secondly, the rate of achievement of this goal to aspire for a long and healthy life differs widely across countries (11,13,29). The Human Development Index, in addition to suggesting a correlation between income and health, also expresses a strong correlation between an individual's place in the income distribution and his or her health outcomes within a country (2,30).…”

“…Here, an increase in individuals' poor health will likely lead to a loss in labor workforce and productivity (4,16). Therefore, addressing public health and health expenditures, though important for both developed and developing countries, is more critical for the latter (3,4,11,13,16,36). It is generally assumed from common knowledge that individuals who are healthier are able to work more effectively, in terms of physical and mental workload.…”

The Role of Macroeconomic Indicators on Healthcare Cost

“…This study moves further to deepen the understanding by testing the nonlinear relationship between health expenses and economic growth using the Kuznets curve hypothesis. Methodologically, some studies applied estimation techniques, such as fixed effect model and unit root Behera and Dash [24], pooled mean group estimation Barkat, Sbia [25] and others Zhang, Zhang [26], Akinlo and Sulola [27], Aboubacar and Xu [28] used the generalized methods of moments procedure to investigate the factors influencing health care costs.…”

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“…Fatuase et al (2016), focused on the effect of agriculture and health expenditures on economic growth in Nigeria. On the other hand, Aboubacar and Xu (2017), stressed their work on the impact of health expenditure on the economic growth in Sub-Saharan Africa. Hence there is need to carry out empirical study on the effect of health outcomes on the agricultural output.…”