Effect of economic uncertainty on public health expenditure in Economic Community of West African States: Implications for sustainable healthcare financing

Abstract

This study investigates the dynamic effect of economic uncertainty on public health expenditure in the Economic Community of West African States region. The investigation is motivated by the recent volatilities in the global economy in the face of increasing demand for adequate funding of health systems in the region, and the need to fill the existing gap in the literature. The study employs the panel autoregressive distributed lag model to express the theoretical relationship between public health expenditure per capita, economic uncertainty and population growth rate, and estimates the model parameters using the mean group and the pooled mean group estimators, after accounting for stationarity and cointegration. Results reveal that on the aggregate, economic uncertainty and population growth are significant determinants of per capita health spending in the long run. When the countries are disaggregated by income groups, evidence suggests that in low‐income countries, economic uncertainty is negatively associated with health spending in the short run, while a growing population reduces health spending per capita in the long run. In lower‐middle‐income countries, economic uncertainty increases health spending in the short run, but reduces it in the long run as uncertainty persists, while population growth negatively impacts health spending in the long run. We conclude that the dependence on public funding of the health system in the region appears unsustainable. Thus, health financing policies need to explore alternative funding mechanisms that entrench cost‐sharing between the public and private financiers.