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Wasted windfalls: Inefficiencies in health care spending in oil rich countries

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  • Michael Keller

    (Department of Economics, University of Sussex, Brighton, UK)

Abstract

This paper uses Stochastic Frontier Analysis (SFA) to determine whether oil rents drive inefficiency in the healthcare sector. SFA simultaneously estimates a production function for health outputs and the determinants of inefficiency in production. Using a sample of 119 countries covering the period 2000 to 2015, unexpectedly high oil revenues are shown to increase inefficiency. Oil rents hinder countries in reaching their potential life expectancy. Exploiting exogenous variation in the international oil price reveals that causality runs from oil rents to inefficiency. The effect varies with institutions, sex and age. The effect is more pronounced in democracies, and women and children are affected more. Transparency and inequality are potential mechanisms.

Suggested Citation

  • Michael Keller, 2019. "Wasted windfalls: Inefficiencies in health care spending in oil rich countries," Working Paper Series 0819, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:0819
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    More about this item

    Keywords

    Oil windfalls; health expenditure; stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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