IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-20-00447.html
   My bibliography  Save this article

Healthcare Expenditure and Baumol Cost Disease in Sub-Sahara Africa

Author

Listed:
  • Jamiil Jeetoo

    (Open University of Mauritius)

Abstract

Previous studies have shown that the unbalanced growth model of Baumol (1967) provides a potential explanation for the observed secular rise in healthcare expenditure in developed countries. The model implies that healthcare expenditure is driven by wage increases in excess of productivity growth. However, no study has tested this hypothesis in the developing world. This study formally examines if healthcare costs in Sub-Sahara Africa (SSA) are affected by the Baumol Cost Disease. It relies on an empirical test proposed by Hartwig (2008) and extended by Colombier (2012), and uses a panel data set of 44 countries covering the period 2004–2016. The results suggest that the healthcare sector in SSA is partly contracted by the Baumol Cost Disease. Further, the result suggests that productivity gains over the period under study were over compensated in SSA overall, suggesting that marginal income is higher than marginal productivity in the economy.

Suggested Citation

  • Jamiil Jeetoo, 2020. "Healthcare Expenditure and Baumol Cost Disease in Sub-Sahara Africa," Economics Bulletin, AccessEcon, vol. 40(4), pages 2704-2716.
    • Handle: RePEc:ebl:ecbull:eb-20-00447
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2020/Volume40/EB-20-V40-I4-P236.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jamiil Jeetoo, 2020. "Spillover effects in public healthcare expenditure in Sub‐Saharan Africa: A spatial panel analysis," African Development Review, African Development Bank, vol. 32(2), pages 257-268, June.
    2. Colombier, Carsten, 2012. "Drivers of health care expenditure: Does Baumol's cost disease loom large?," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 12-5, University of Cologne, FiFo Institute for Public Economics.
    3. Keun Lee & Sanika Sulochani Ramanayake, 2018. "Adding-Up Problem and Wage–Productivity Gap in Exports of Developing Countries: A Source of the Middle-Income Trap," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(5), pages 769-788, December.
    4. M. Hashem Pesaran, 2015. "Testing Weak Cross-Sectional Dependence in Large Panels," Econometric Reviews, Taylor & Francis Journals, vol. 34(6-10), pages 1089-1117, December.
    5. Eric Arthur & Hassan E. Oaikhenan, 2017. "The Effects of Health Expenditure on Health Outcomes in Sub-Saharan Africa (SSA)," African Development Review, African Development Bank, vol. 29(3), pages 524-536, September.
    6. Edward Nketiah-Amponsah, 2019. "The Impact of Health Expenditures on Health Outcomes in Sub-Saharan Africa," Journal of Developing Societies, , vol. 35(1), pages 134-152, March.
    7. Karim Barkat & Zouhair Mrabet & Mouyad Alsamara, 2016. "Does Official Development Assistance for health from developed countries displace government health expenditure in Sub-Saharan countries?," Economics Bulletin, AccessEcon, vol. 36(3), pages 1616-1635.
    8. Murthy, Vasudeva N.R. & Okunade, Albert A., 2009. "The core determinants of health expenditure in the African context: Some econometric evidence for policy," Health Policy, Elsevier, vol. 91(1), pages 57-62, June.
    9. Bates, Laurie J. & Santerre, Rexford E., 2013. "Does the U.S. health care sector suffer from Baumol's cost disease? Evidence from the 50 states," Journal of Health Economics, Elsevier, vol. 32(2), pages 386-391.
    10. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    11. Baumol, William J, 1993. "Health Care, Education and the Cost Disease: A Looming Crisis for Public Choice," Public Choice, Springer, vol. 77(1), pages 17-28, September.
    12. Vogelsang, Timothy J., 2012. "Heteroskedasticity, autocorrelation, and spatial correlation robust inference in linear panel models with fixed-effects," Journal of Econometrics, Elsevier, vol. 166(2), pages 303-319.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kaan Celebi & Jochen Hartwig & Anna Pauliina Sandqvist, 2024. "Baumol's Cost Disease in Acute vs. Long-term Care - Do the Differences Loom Large?," Chemnitz Economic Papers 062, Department of Economics, Chemnitz University of Technology.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Akinwande A. Atanda & Andrea K. Menclova & W. Robert Reed, 2016. "Is Health Care Infected by Baumol’s Cost Disease? Test of a New Model Using an OECD Dataset," Working Papers in Economics 16/04, University of Canterbury, Department of Economics and Finance.
    2. Jamiil Jeetoo, 2020. "Spillover effects in public healthcare expenditure in Sub‐Saharan Africa: A spatial panel analysis," African Development Review, African Development Bank, vol. 32(2), pages 257-268, June.
    3. Akinwande Atanda & Andrea Kutinova Menclova & W. Robert Reed, 2018. "Is health care infected by Baumol's cost disease? Test of a new model," Health Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 832-849, May.
    4. Akinwande Atanda & W. Robert Reed, 2019. "Not Evidence for Baumol’s Cost Disease," Working Papers in Economics 19/05, University of Canterbury, Department of Economics and Finance.
    5. Hevia, Constantino & Serven, Luis, 2013. "Partial consumption insurance and financial openness across the world," Policy Research Working Paper Series 6479, The World Bank.
    6. Siciliani Luigi, 2013. "The Economics of Long-Term Care," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 343-375, August.
    7. Bradley Rossen & Akhter Faroque, 2016. "Diagnosing the Causes of Rising Health-Care Expenditure in Canada: Does Baumol's Cost Disease Loom Large?," American Journal of Health Economics, MIT Press, vol. 2(2), pages 184-212, Spring.
    8. Atanda, Akinwande & Reed, W. Robert, 2020. "Not Evidence for Baumol's Cost Disease. A replication study of Hartwig (Journal of Health Economics, 2008)," International Journal for Re-Views in Empirical Economics (IREE), ZBW - Leibniz Information Centre for Economics, vol. 4(2020-1), pages 1-10.
    9. Lars-Erik Borge & Kjetil Hatlebakk Hove & Tobias Lillekvelland & Per Tovmo, 2018. "Cost disease in defense and public administration: Baumol and politics," Public Choice, Springer, vol. 175(1), pages 1-18, April.
    10. Skare, Marinko & Gavurova, Beata & Sinkovic, Dean, 2023. "Regional aspects of financial development and renewable energy: A cross-sectional study in 214 countries," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1142-1157.
    11. Mamba, Essotanam & Ali, Essossinam, 2022. "Do agricultural exports enhance agricultural (economic) growth? Lessons from ECOWAS countries," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 257-267.
    12. Hikmet Akyol & Selim Basar, 2024. "Empirical Analysis of Turkish Banking Sector Institutional and Macroeconomic Determinants of Risks," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 73(74-1), pages 59-98, June.
    13. Huntington, Hillard & Liddle, Brantley, 2022. "How energy prices shape OECD economic growth: Panel evidence from multiple decades," Energy Economics, Elsevier, vol. 111(C).
    14. Liu, Tong & Lan, Bo, 2024. "On the conflict of natural resources abundance and export upgrading in upper-middle and high-income countries," Resources Policy, Elsevier, vol. 89(C).
    15. Elvis D. Achuo & Simplice A. Asongu, 2024. "The impact of public spending on water, sanitation and hygiene (WASH) adoption: Governance thresholds for complementary policies," Working Papers of the African Governance and Development Institute. 24/030, African Governance and Development Institute..
    16. Jushan Bai & Sung Hoon Choi & Yuan Liao, 2021. "Feasible generalized least squares for panel data with cross-sectional and serial correlations," Empirical Economics, Springer, vol. 60(1), pages 309-326, January.
    17. Beri, Parfait & Molem, Christopher Sama, 2024. "The impact of economic globalisation on labour market outcomes in Africa," MPRA Paper 122554, University Library of Munich, Germany.
    18. Gupta, Abhimanyu, 2018. "Autoregressive spatial spectral estimates," Journal of Econometrics, Elsevier, vol. 203(1), pages 80-95.
    19. Moutsianas, Konstantinos A. & Kosmidou, Kyriaki, 2016. "Bank earnings volatility in the UK: Does size matter? A comparison between commercial and investment banks," Research in International Business and Finance, Elsevier, vol. 38(C), pages 137-150.
    20. Pagliari, Maria Sole & Ahmed Hannan, Swarnali, 2024. "The volatility of capital flows in emerging markets: Measures and determinants," Journal of International Money and Finance, Elsevier, vol. 145(C).

    More about this item

    Keywords

    Baumol Cost Disease; Healthcare Expenditure; Unbalanced Growth;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-20-00447. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.