Income Elasticity Of Health Expenditure Implications for Sustainability of Economic Growth across Sub-Saharan Africa

Abstract

The role of health in economic growth sustainability cannot be overemphasized. Generally, good health is recognized as a basic human right and an essential element of human welfare which sustained social and economic development. Healthy children attain more education, high labour efficiency as adults and therefore enhance income growth. Thus, investment in health improves human capital, which enhances labour efficiency, increases output and income. In literature, evidence abound that countries with low health expenditure and catastrophic health status are associated with poor economic growth trajectory. In the light of this, this paper used pooled-panel (1995-2016) of selected Sub-Saharan African countries examines the income elasticity of health expenditure and its implication for sustainable growth in the region. The study employed the homogenous and heterogenous panel unit roots and cointegration approaches to test the mean reversion and cointegration properties among the selected variables. Due to the inherent presence of cross-section dependence and endogeneity of studies like this paper, Pooled Cross-Section SUR estimation model, which estimates a feasible GLS specification correcting for both cross-section heteroskedasticity and contemporaneous correlation will be adopted. The findings of this paper are expected to show that very low-income elasticity of health expenditure exists across Sub-Saharan African countries and across different health expenditure types. It is also expected that low-income countries exhibits negative income elasticity of health expenditure compared with upper middle and high income countries. Also a country with very low income elasticity of health expenditure is expected to experience low or poor growth sustainability trajectory. The study recommends that governments of SSA should invest on health in order to gain a sustainable growth trajectory. They  should design a regional robust and sustainable model that will help to improve health system performance across member countries, and in effect reverse the negative income- health spending linkages for sustainable growth.