Causal nexus between health expenditure, health outcome and economic growth: Empirical evidence from Sub‐Saharan Africa countries

Abstract

INTRODUCTION: The relationships among health expenditure, health outcome, and economic growth have been given significant consideration in the current literature. Nevertheless, there are potential gaps in the nature of health-growth nexus that current empirical studies have not thoroughly considered. METHODOLOGY: This study explores Granger causality and cointegration relationships in a trivariate framework among, health expenditure, health outcome, and economic growth. We used three health outcome measures and a panel vector autoregressive model to study 45 countries in Sub-Saharan Africa between 1990 and 2018. Our innovative panel data evaluation technique allows to ascertain significant causal relationships among the studied variables in the short and long run. RESULTS: Findings from the study include (1) health expenditure and health outcome Granger-cause economic growth in the long run; (2) economic growth Granger-cause health expenditure in the short run; (3) no causal relationship was found running from health expenditure and health outcome to economic growth in the short-run. The former result (1) may not be surprising, given that the countries considered in this study are relatively less developed countries from Sub-Saharan Africa. Hence, further health improvement may play a statistically significant role in spurring further economic growth. CONCLUSION: Based on the results, the study presents interesting and possible effective policy perspectives for health improvement in the studied countries. Policies that stimulate health spending are needed to create a better and more industrious society that can support SSA's economic progress. This is because a healthy person may be more productive than someone who is sick, allowing them to produce greater output.

Topics & Concepts