Health care financing and health outcomes in Pacific Island countries

Abstract

This paper provides empirical evidence on the relationship between per capita public health expenditure and three measures of health outcomes (infant and under-five mortality rates and crude death rates) using cross-country data from seven Pacific Island countries for selected years between 1990 and 2002. The results of the fixed-effects estimation procedure, correcting for AR(1) errors, provide strong evidence that per capita health expenditure is an important factor in determining health outcomes. The elasticity of the infant mortality rate with respect to per capita health expenditure is -0.66. Based on this elasticity, a 10% increase in per capita health expenditure means that a country such as Papua New Guinea, with a high infant mortality rate, would see a reduction of 3.6 infant deaths per 1000 live births, with an average reduction of 2.0 infant deaths per 1000 live births for the Pacific Island countries. The empirical results also provide strong evidence that per capita incomes and immunization are additional core factors that determine health outcomes. Some policy implications are drawn.