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

Abstract

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. 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. 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. 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.