THE NEXUS BETWEEN HEALTH CARE SPENDING AND ECONOMIC GROWTH IN SELECTED COUNTRIES IN SUB-SAHARA AFRICA

Abstract

The study investigates the relationship between healthcare spending and economic growth in six selected Sub-Saharan African countries: Nigeria, Ghana, Togo, Benin, Cameroon, and Ethiopia. The study employs the Autoregressive Distributed Lag (ARDL) model as an estimation technique to analyse the panel data which spans from 2000 to 2020. The research examines both the short- and long-run impacts of healthcare spending, population growth, and life expectancy on real GDP (a proxy for economic growth). Based on the ARDL panel results, it is stated that, in the short run, both healthcare spending and life expectancy exert a significant negative impact on real GDP. However, in the long run, real GDP is positively and significantly influenced by all the regressors, highlighting the crucial role of healthcare investment in driving economic development. Additionally, the Granger causality test reveals a bidirectional relationship between real GDP and per capita health spending, suggesting that enhancements in healthcare can stimulate economic growth, and economic growth, in turn, can lead to increased healthcare investments. The study strongly recommends that policymakers in these countries adhere to the Abuja Declaration by allocating 15% of their national budgets to the healthcare sector to bolster economic outcomes. These findings emphasize the critical importance of sustained healthcare investment as a catalyst for long-term economic growth in Sub-Saharan Africa.