Dynamic inference of healthcare expenditure on economic growth in Sub-Saharan Africa: a dynamic heterogenous panel data analysis

Abstract

PurposeThis article investigates the dynamic implication of healthcare expenditure on economic growth in the selected ten Sub-Saharan African countries over the period 2000–2018.Design/methodology/approachThe study methodology included dynamic heterogenous panel, using mean group and pooled mean group estimators. The investigation of the healthcare expenditure and economic growth nexus was achieved while controlling the effects of investment, savings, labor force and life expectancy via interaction terms.FindingsThe results from linear healthcare expenditure have a significant positive impact on economic growth, while the nonlinear estimates through the interaction terms between healthcare expenditure and investment have a negative statistically significant impact on growth. The marginal effect of healthcare expenditure evaluated at the minimum and maximum level of investment is positive, suggesting the impact of health expenditure on growth does not vary with the level of investments. This result responds to the primary objective of the article.Research limitations/implicationsIn policy terms, the impact of investment on healthcare is essential to addressing future health crises. The impact of coronavirus disease 2019 (COVID-19) can never be separated from the shortages or low prioritization of health against other sectors of the economy. The article also provides an insight to policymakers on the demand for policy reform that will boost and make the health sector attractive to both domestic and foreign direct investment.Originality/valueGiven the vulnerability of SSA to the health crisis, there are limited studies to examine this phenomenon and first to address the needed investment priorities to the health sector infrastructure in SSA.