The Impact of Fiscal Policy on Income Inequality and Health Outcomes in Sub-Saharan Africa Countries

Abstract

This study estimates the relative effect of fiscal policy on income inequality and health outcomes in Sub-Saharan Africa (SSA) countries. The study covers the period 2010–2022 using panel data on 12 countries. Estimation is done using the System GMM estimation technique. It is shown that income tax (ICT) exerts a positive and significant effect on MORT. Government health expenditure (GXH) and population growth (POP) negatively but insignificantly influence MORT, while the effect of carbon emission (CO2) is positive, but not statistically significant. The effect of health-oriented development assistance (HODA) on MORT is negative and statistically significant. Additionally, government health expenditure (GXH) exerts a positive but insignificant effect on LFX. The effect of health-oriented development assistance (HODA) on LFX is also positive and statistically significant. Both income tax (ICT); the effect of POP is negative and significant. Finally, the study reveals that a one-period lag in income inequality (INQ) has a negative and significant effect on current INQ. In addition, government health expenditure (GXH), income tax (ICT), and population growth all exert a negative effect on INQ, with ICT being the most significant of all of them. The effect of health-oriented development assistance (HODA) and carbon emission (CO2) is found to be positive, but not statistically significant. Amongst others, the study recommends that countries across SSA formulate policies that will help in slowing down population growth to levels that are manageable and will not pose adverse health challenges in the region.