Health Expenditure, Health Outcomes And Economic Growth In Sub-Saharan Africa

The study examines the interrelationship among health expenditure, health outcomes and economic growth in some selected Sub-Saharan African (SSA) countries. These countries have made significant efforts in increasing health expenditure over the years, with the aim of improving health outcomes and accelerating economic growth. Despite this, health outcomes have only responded marginally in SSA, raising concerns on the significance of health expenditure in improving health outcomes. Besides, empirical evidence of the effect of health outcomes on economic growth is mixed. This study thus investigates the effect of health expenditure on health outcomes, applying the fixed effects model. Further, the study examines the effect of health outcomes on economic growth using the Generalised Method of Moments (GMM) estimator. Lastly, the study tests the causal relationship among health expenditure, health outcomes, and economic growth using Panel Vector Autoregressive (PVAR) model. The data for the study were sourced from the 2012 World Bank's World Development Indicators (WDI) for a sample of 40 SSA countries from 1995 to 2011. The findings from the study indicate that health expenditure has a significant, but inelastic effect on health outcomes in SSA, reducing mortality rates and improving life expectancy at birth. Reductions in mortality rates were significantly influenced by public health expenditure, whereas improvements in life expectancy at birth were significantly influenced by private health expenditure. There is, however, a strong complementary relationship between private and public health expenditures in SSA, despite the dominance of the former over the latter. In addition, clean water, proper sanitation and immunisation rates were found to enhance health outcomes, whereas the prevalence of diseases and urban population growth rates had deleterious effects on health outcomes. Health outcomes were also found to contribute significantly to economic growth in SSA. The empirical evidence indicates that this was driven more by reductions in mortality rates than by improvements in life expectancy at birth in the region. Physical capital, education and openness to trade contribute positively to economic growth, whereas the age dependency ratio serves as a drag on growth rate. Lastly, the findings indicate bidirectional causality between health expenditure and health outcomes, between health outcomes and economic growth and unidirectional causality from health expenditure to economic growth. xiii Given the significant, but inelastic effect of health expenditure on health outcomes and the significant contribution of health outcomes to economic growth, the study recommends that SSA countries should make efforts to increase health expenditure to improve health outcomes in order to speed up growth. In particular, there should be deliberate efforts to increase public health expenditure with a view to reducing the burden of private health spending on individuals. This perhaps can be achieved through effective health insurance schemes, which will enable people to save against financial crisis that may arise due to ill health, thereby reducing out-of-pocket health expenditure. In addition, there is the need for public enlightenment on the importance of constant health check-ups given the significance of the use of preventive health care in enhancing health outcomes. Furthermore, it is necessary to improve environmental conditions due to the negative effects of such conditions on health outcomes. Finally, there is the need to manage the population growth rates in SSA countries to reduce the age dependency ratio in order to enhance the growth rate of per capita GDP in the region.