Analysis and Implications of the Determinants of Healthcare Expenditure in African Countries

Abstract

The income elasticity of health care spending in the OECD countries tends toward luxury good values. Similar studies, based on more recent data, and capable of informing macroeconomic health policies of the African countries, do not currently exist. How the health care expenditure in Africa responds to changes in the Gross Domestic Products (GDP), Official Development Assistance (ODA), and other determinants, is also relevant for health policy because health care is a necessity in the 'basic needs' theory of economic development. This paper presents econometric model findings of the determinants of per-capita health expenditure (in PPPs) for 26 African countries, using the flexible Box-Cox model regression methods and 1995 cross-sectional data (sources: WRI, UNEP, UNDP, The World Bank). The economic and other determinants, capturing 74 percent of the variations in health expenditures, include per-capita GDP (in PPPs), ODA (US dollar), Gini income inequality index, population dependency ratio, internal conflicts, and the percentage of births attended by trained medical workers. Income inequality dampens, while the ODA and population per health personnel raise health care expenditure. The GDP elasticity of about 0.6 signals the tendency for health care to behave like a technical 'necessity'. Implications for sustainable basic health development policies are discussed.

Extending the concept of the resource curse: Natural resources and public spending on health

“…While most studies focus on OECD countries, Okunade (2005) and Murthy and Okunade (2009) confirm the importance of GDP for health expenditures in Africa.…”

“…As income represents a crucial determinant of public health expenditures, supplements to income, such as foreign aid, are expected to relax macroeconomic budget constraints and increase resources for health care (Okunade, 2005). Moreover, often a substantial proportion of development assistance is targeted at the health sector and aims to shift government priorities.…”

The core determinants of health expenditure in the African context: Some econometric evidence for policy

“…There is, however a striking dearth of macrodata econometric models of health care spending using data of the African countries. Major studies that rely on data from the African setting include Okunade [18], Gbesemete and Gerdtham [19], Murthy [20], and Okunade [21]. The Gbesemete and Gerdtham [19] study, based on 1984 cross-sectional data of 30 Sub-Saharan and N. African countries, had limited observations and other econometric challenges.…”

“…The Gbesemete and Gerdtham [19] study, based on 1984 cross-sectional data of 30 Sub-Saharan and N. African countries, had limited observations and other econometric challenges. Murthy's [20] work is too brief, and the latest published work, Okunade [21], using 1995 cross-sectional data of 26 African countries, is also limited in the degrees of freedom for estimating the econometric model.…”

“…FAID, representing resource inflows, supplements domestic incomes and originates from multilateral and bilateral sources, NGOs and Foundations [22, p. 283]. Therefore, FAID, irrelevant in the context of modeling the determinants of HEXP of the developed countries, augments the GDP resource base for health development in the African setting [21]. Moreover, DOC captures the supply of the gatekeeping medical personnel, AGE65 is the proxy for old-age population dependency, and MMR is a measure of population health status measure.…”