A panel analysis of health expenditure and economic growth of the economic community of West African States
Abstract
The West African region have been plagued with huge burden of diseases such as HIV/AIDS, malaria, neglected tropical diseases, Tuberculosis, Ebola among others. Aside these non-communicable and communicable diseases, the region also suffers from malnutrition and poverty which places demand on the kind of medicines needed. One of the many efforts made by African leaders in the fight against poor health outcome in the continent was the Abuja Declaration on public health spending by African countries which request all government to allocate 15% of their income to health. This indicates that, there is need for countries to improve their allocation of resource on health. The main purpose of this study therefore, is to empirically examine the relationship between health expenditure and economic growth of the countries of Economic Community of West African States for the period 1995- 2014. To achieve this aim, the Panel cointegration approach as well as the Toda and Yamamoto causality test are utilized as the modelling techniques and it was found that there is long run equilibrium relationship among the variables. The result of the Panel Fully Modified Ordinary Least Squared was found suitable for this study and it indicates that Log of Gross Domestic Product Per Capita, Log of Life Expectancy and Log of Population Growth are positively related to Log of Health expenditure Per Capita while Log of Infant Mortality Rate is negatively related to Log of Health expenditure Per Capita. It was also observed, that the coefficient of Log Gross Domestic Product Per Capita, Log of Life Expectancy and Log of Infant Mortality rate are high compared to Log of Population growth. All these variables followed the a priori expectation. Log Gross Domestic Product Per Capita is positive and statistically significant at 5% significant level while Log of Infant Mortality rate is negative and statistically significant at 5% significant level. Although, log of life expectancy and log of population growth are positive, they not significant at the 5% significance level. The outcome of the Toda and Yamamoto causality test showed that there is bidirectional causality between health expenditure and Gross Domestic Product per capita for the Economic Community of West African States for the period under investigation. The coefficient of Gross Domestic Product Per Capita is less than unit hence; it means that health expenditure in this region is a necessity and not a luxury. This study therefore recommend that the government of these countries should invest more to improve the level of growth as this will equally stimulate investment in the health sector for these economies. The elasticity of the Gross Domestic Product per capita found in this study should be considered as the benchmark for financial outlay of the per capita health expenditure in the policy framework bearing in mind that health is a capital which would mean that investing more to improve it would result in increase in income which will generally lead to growth of the economy.