Health expenditure convergence and the roles of trade and governance in Africa

Abstract

This study investigates the convergence hypothesis in health expenditures in 40 African countries over the 2000–2019 period. The new non-linear dynamic factor model is used on panel data extracted from the World Development Indicator and the World Governance Indicator. We consider two categories of health expenditures: the domestic general government health expenditure as a percentage of government expenditure and the domestic general government health expenditure per capita. The results show the absence of full panel convergence for the two indicators used. However, there is evidence of convergence clubs. The overall marginal effect of the control variables is consistent with the existing literature. The results further show a strong influence of trade in attaining convergence among the clubs for both models. However, governance quality only affects the probability of converging in a club for the general government health expenditure as a percentage of government expenditure model. The findings suggest that policies on promoting health expenditure convergence should pursue initiatives that encourage trade. Efforts should also be targeted to improve the quality of governance.